Are Legal Fees Paid To Collect Severance Tax Deductible?

Did you incur legal fees in order to collect money owed to you for severance, pension benefits or a retiring allowance? You may claim those expenses as Other Deductions on the tax return. But there are a few catches.

First, those expenses must not be reimbursed to the employee and, if they are, the amount collected must be included in income.

Next, be aware that your claim for legal fees may be reduced if amounts received from the dispute are transferred into your RRSP. If unabsorbed by the severance income reported, these fees can be carried forward for seven years to offset other income.

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