Whether or not a party can deduct legal fees paid by that party depends on federal tax law. Legal fees paid for the production of taxable income, such as the legal fees paid by a dependent spouse to obtain an alimony award (because alimony is taxable to the recipient), are generally deductible. However, that deduction may be limited or lost in its entirety because of the alternative minimum tax (AMT).
On the other hand, legal fees paid by the independent spouse to his or her own attorney for the negotiation or litigation of alimony when that spouse ends up paying alimony, are not deductible. Moreover, legal fees paid by one spouse for the other spouse’s legal fees are also not deductible. In that circumstance however tax planning is permitted by the IRS and a frequent methodology employed is to have the payor spouse pay the other spouse’s attorneys’ fees in the form of additional alimony. The alimony is deductible to the payor and, while it is taxable to the payee, when the payee uses that alimony to pay his or her attorney, the fees are deductible by the payee.
Whenever one is dealing with issues of deductibility/taxability, one should always seek the advice of a qualified professional.