Tax deductions for lawyers come with owning the practice, as a partner or on your own.
A practice you own deducts its ordinary and necessary costs under Section 162. If the practice is a partnership, S corporation or sole proprietorship, you can also take the 20% QBI deduction. Law is a specified service, so that deduction phases out as your taxable income rises. A lawyer on a W-2 gets neither.
Updated · Sources
Law practice owners, 2026
- $403,500
- is the joint taxable income where the QBI deduction for a law practice starts to shrink. It is gone at $553,500.
- 15.3%
- is the self-employment tax rate on 92.35% of practice earnings, up to the $184,500 Social Security wage base.
- 110%
- of last year’s tax, paid on schedule, avoids the underpayment penalty once last year’s AGI tops $150,000.
For single filers, the phase-out starts at $201,750 and ends at $276,750. For married people filing separately, the 110% rule starts above $75,000 of AGI. The 2027 amounts are expected in October or November 2026.
A lawyer’s cost must pass four tests to be deductible.
You own the practice
Practice costs are deductible when the practice is yours, alone or as a partner. A partner who pays a firm cost personally can deduct it only when two things hold. The partnership agreement must require the payment, and the firm must not repay it. If you are on a W-2, bar dues or continuing legal education (CLE) you pay yourself are not deductible. That deduction was suspended starting in 2018, and the suspension is now permanent. An accountable plan lets the firm repay those costs without adding the money to your taxable wages.
The cost is ordinary and necessary
Staff pay, rent, research services and malpractice insurance are ordinary and necessary costs of a law practice. Section 162 lets the practice deduct each of them. Bar association dues qualify too, except any part the association tells you goes to lobbying or political campaigns.
The course keeps your skills current
CLE is deductible because it maintains skills your practice already requires. Law school and a bar review course are not, since they meet the minimum education needed to practice at all.
The cost is not personal
Personal, living and family costs are not business deductions, even when you own the practice. Suits and other clothes you could wear outside work generally count as personal.
When the firm pays these costs, it deducts them itself, so your share of profit on the K-1 is already lower.
How much self-employment tax does a partner owe on $500,000?
A law firm partner with $500,000 of practice earnings owes about $38,175 of self-employment tax for 2026. She deducts $18,134 of it.
Social Security, 12.4%
$22,878
It applies only to the first $184,500 of her $461,750 of net earnings.
Medicare, 2.9%
$13,391
Medicare has no cap, so it applies to all $461,750.
Additional Medicare, 0.9%
$1,906
It applies to the $211,750 above the $250,000 joint threshold.
Total self-employment tax
$38,175
She pays it through her estimated payments, on top of her income tax.
Deduction for half
$18,134
She deducts half of the Social Security and 2.9% Medicare parts. The 0.9% part is not deductible.
Self-employment tax falls on 92.35% of her $500,000, which is $461,750 of net earnings from self-employment. The example treats all $500,000 as earned from self-employment, as a partner’s share generally is. Amounts are rounded to the dollar, and income tax is not shown.
What changes when a lawyer makes partner?
These rules apply to a partner in a firm taxed as a partnership.
| On a W-2 | On a K-1 | |
|---|---|---|
| When pay is taxed | In the year you are paid | In the year the firm earns it Even if the firm keeps the cash |
| Income tax withheld | From each paycheck | None You pay as you go |
| Payroll tax | Half paid by the firm | All paid by you As self-employment tax |
| QBI deduction | None on wages | On your profit share |
Guaranteed payments are what the firm pays you for your work, whatever its profit. The firm deducts them and you are taxed on them, but they never count as QBI.
Five tax rules that catch lawyers off guard.
Your spouse’s wages use up the 0.9% threshold
The 0.9% Additional Medicare Tax starts at $250,000 of joint earnings, and wages count first. If your spouse earns $200,000 in wages, only $50,000 of your self-employment income stays under the line. No one withholds this tax on a K-1, so build it into your estimated payments.
Withholding counts toward every quarter
On a joint return, extra withholding from a spouse’s W-2 pay can make up for a quarter you underpaid, even late in the year.
Other states tax your share of firm income
Each state where the firm earns income can tax a nonresident partner on the share of income earned in that state. New York, for example, taxes your distributive share of New York partnership income. Your home state usually credits that tax, but only up to its own tax on the same income.
A lump-sum buyout can stay taxable in your old state
Federal law bars a state from taxing certain retirement income of a nonresident. That includes a written plan paying a retired partner for past service, if it was in effect before retirement began. The payments must come at least yearly, in substantially equal amounts, for your life, your life expectancy or at least 10 years. A lump-sum buyout fails that test, so the state you left may still tax it.
A flat 22% on a bonus can leave tax owing
Employers may withhold federal tax on a bonus at a flat 22%. The 37% rate is required only on supplemental pay above $1 million in a year. An associate or in-house lawyer in the 32% or 35% bracket can owe the difference at filing.
Our tax planning for lawyers starts with the income your practice expects this year.
Valim’s CPAs help law firm partners and solo lawyers plan the tax on their practice income, and file their federal and state returns.
- We size each quarterly payment from the guaranteed payments and profit share you expect.
- We project your taxable income before year end, so you know how much of the QBI deduction the phase-out leaves you.
- We compare filing your own nonresident returns with joining the firm’s composite (group) return. Then we file what you need and claim your home state’s credit.
- We prepare a small firm’s Form 1065 and its partners’ K-1s, or a solo lawyer’s Schedule C, once your bookkeeper closes the year.
- If a state or the IRS sends a notice on a return we prepared, we respond, and the work is included in your fee.
- Individual return
- from $195
- Business return
- from $495
We quote a flat fee before work starts. We do not bill hourly.
What do lawyers ask about their taxes?
What can lawyers write off on taxes?
An owner can write off the practice’s ordinary and necessary costs, such as bar dues, malpractice insurance and staff pay. Continuing legal education (CLE) is deductible too. Partners and sole proprietors also deduct half of their self-employment tax, not counting the 0.9% Additional Medicare Tax. Owners of a pass-through practice may qualify for the QBI deduction as well. Law school and a bar review course are not deductible, and everyday suits generally are not either. A lawyer on a W-2 cannot write off job costs paid personally, so ask the firm to repay them through an accountable plan.
What are the 10 most overlooked tax deductions?
There is no official list, and the deductions most often missed depend on how you earn. A partner or solo lawyer can deduct half of self-employment tax. Below the income threshold, law’s status as a specified service does not reduce the QBI deduction. Retirement plan contributions lower taxable income as well, and a practice can add its own contributions on top of your deferrals. A solo practitioner claims the practice’s costs on Schedule C.
Can you deduct lawyer fees off your taxes?
You can deduct lawyer fees that are a cost of running your business. Fees paid to buy a business asset are added to its cost basis instead. Personal legal fees, such as fees for a divorce, separation or support, are not deductible. Legal fees for producing taxable income are no longer deductible on Schedule A, since that deduction’s suspension from 2018 is now permanent. Fees in unlawful discrimination and certain whistleblower cases are deductible above the line, so you need not itemize. The deduction is capped at the settlement or award you include in income.
How are law firm partners taxed?
A law firm partner owes tax on a share of the firm’s profit, paid out or kept in the firm, plus any guaranteed payments. Both generally count as self-employment income, so the partner pays all of the Social Security and Medicare tax. No income tax is withheld, and estimated payments are due April 15, June 15, September 15 and January 15 of the next year. Paying the safe harbor amount on time avoids the underpayment penalty.
Do lawyers qualify for the QBI deduction?
Yes, a lawyer who owns a pass-through practice can claim the 20% QBI deduction. Law is a specified service, though, so the deduction has an income limit. For 2026, the deduction shrinks once joint taxable income passes $403,500 ($201,750 for single filers) and is gone at $553,500 ($276,750). Wages never count, and neither do the guaranteed payments on a partner’s K-1. The field of law includes paralegals, arbitrators and mediators, but not work that needs no legal skill, such as printing or delivery. A worked example on the doctors page shows the same phase-out in dollars.
Sources
- 26 U.S.C. § 162, Trade or business expenses
- 26 C.F.R. § 1.162-5, Expenses for education
- 26 C.F.R. § 1.162-15, Contributions, dues, etc.
- 26 C.F.R. § 1.62-2, Reimbursements and other expense allowance arrangements
- 26 U.S.C. § 262, Personal, living, and family expenses
- 26 C.F.R. § 1.262-1, Personal, living, and family expenses
- 26 U.S.C. § 67, 2-percent floor on miscellaneous itemized deductions
- 26 U.S.C. § 62, Adjusted gross income defined
- IRS, Publication 334 (2025), Tax Guide for Small Business
- IRS, 2025 Instructions for Schedule E (Form 1040)
- 26 U.S.C. § 707, Transactions between partner and partnership
- 26 U.S.C. § 199A, Qualified business income
- 26 C.F.R. § 1.199A-5, Specified service trades or businesses
- IRS, Rev. Proc. 2025-32 (2026 inflation adjustments)
- 26 U.S.C. § 1401, Rate of tax on self-employment income
- 26 U.S.C. § 1402, Definitions (net earnings from self-employment)
- 26 U.S.C. § 164, Taxes (deduction for half of self-employment tax)
- IRS, Publication 15 (2026), Employer’s Tax Guide
- 26 U.S.C. § 6654, Failure by individual to pay estimated income tax
- New York State DTF, 2025 Instructions for Form IT-203
- 4 U.S.C. § 114, Limitation on State income taxation of certain pension income
Reviewed and updated September 2026. General information, not advice for your situation.