Legal fees to buy property or defend title belongs on Form 4562, form 4562, carried to schedule c line 13.
Why form 4562
Legal fees to acquire property, close a purchase or defend title to something you already own are costs of the asset rather than costs of the year, so they are added to that asset's basis instead of going on line 17. You recover them the way you recover the asset: through depreciation on Form 4562, carried to line 13, for a building or equipment, and not at all until sale for land. Routine legal work about operating the property, a tenant dispute or a cleaning contract for instance, stays on line 17.
Stop looking up lines one at a time. ClaryBook totals your year into an IRS Schedule C worksheet in form order, Part I and Part II line by line, so legal fees to buy property or defend title lands on Line 4562 without you sorting it.
Start for freeWhat legal fees to buy property or defend title is confused with
- Line 17, legal and professional services
- Legal work about running the business or the property is an ordinary line 17 expense; legal work about getting or keeping title goes into the asset's basis.
- Schedule E, schedule e, rental real estate
- If the property is rental real estate rather than premises you operate from, the whole analysis moves to Schedule E.
- Line 27a, other expenses
- Legal work on acquiring a lease rather than ownership is amortized over the lease term and reported in other expenses.
Examples that belong on form 4562
- $2,700 of closing legal fees on a $340,000 workshop building, added to the building's basis
- $1,500 defending a boundary claim against the lot your shop sits on
- A $600 title opinion obtained before buying a storage yard
- $1,100 of legal work on an easement that benefits the property permanently
What does not belong here
- A line 17 deduction in the year of purchase
- A deduction for the share allocated to land, which is not depreciable
- Ordinary tenant or vendor disputes, which are line 17
The limit that applies
Fees allocated to land are never depreciated and are recovered only when the property is sold.
What to keep
Keep the closing statement showing each legal charge and your allocation between land and building. That allocation decides how much of the fee is ever recovered.
Other expenses on form 4562
| Expense | Line |
|---|---|
| a new roof on a business building | Form 4562 |
| a used machine bought second hand | Form 4562 |
| a website build | Form 4562 |
| a work van or truck | Form 4562 |
| buying a business vehicle | Form 4562 |
| expensing or capitalising a purchase | Form 4562 |
| improvements to a rented studio | Form 4562 |
| sales tax paid on a capital asset | Form 4562 |
| workshop machinery such as a 3D printer | Form 4562 |
Related lookups
- Where do tax preparation fees go on Sch C?
- Do rental property expenses go on Schedule C?
- Where do client gifts go on Schedule C?
Sources
- Instructions for Schedule C (Form 1040)
- Publication 946, How To Depreciate Property
- About Form 4562, Depreciation and Amortization
This page explains how Schedule C lines work. It is general information, not tax advice for your situation. If an expense is large or the answer turns on a fact about your business, confirm it with your tax preparer.
Looking for a different expense? The full Schedule C line lookup has every line from 8 to 27 with the expenses that belong on each, and Schedule C expense categories walks the whole form in order.
Stop looking up lines one at a time. ClaryBook totals your year into an IRS Schedule C worksheet in form order, Part I and Part II line by line, so legal fees to buy property or defend title lands on Line 4562 without you sorting it.
Start for free