Line 8860 – Professional fees (includes legal and accounting fees)
You can deduct fees for legal services to prepare leases or collect overdue rents.
If you incur legal fees to buy your rental property, you cannot deduct them from your gross rental income (line 8299). Instead, divide the fees between land and building and add them to their respective cost.
Example
You buy a property worth $200,000 ($50,000 for the land and $150,000 for the building) and incur legal fees of $10,000.
Split the $10,000 proportionately between the land and building. In this case, $2,500 is added to the cost of the land (for a total of $52,500) and $7,500 is added to the cost of the building (for a total of $157,500).
Note
The legal fees you paid when selling your rental property are deducted from your proceeds of disposition when calculating your capital gain or capital loss. The deduction for legal fees also applies when calculating a recaptured capital cost allowance (line 9947) or a terminal loss (line 9948).
You can also deduct expenses you had for bookkeeping services, audits of your records and preparing financial statements. You may be able to deduct fees and expenses for advice and help to prepare your income tax return and any related information returns.
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