In specific situations, taxpayers may be interested in using Social Security benefits to offset certain types of legal expenses. However, the IRS has regulations about whether this can be done.

Sometimes individuals will incur legal expenses to produce or collect taxable income or in connection with the determination, collection, or refund of any tax. The legal expenses cannot be used to offset the Social Security benefits and can only be deducted as a Tier 2 miscellaneous itemized deduction. In addition, the deduction is limited to legal expenses for collecting only the taxable part of the taxpayer's benefits. Thus, prorate to determine the amount of legal expense attributable to the taxable Social Security (Rev Rul 87-102).

Caution: The Tax Cuts and Jobs Act (TCJA) of 2017 suspended the Tier 2 miscellaneous itemized deductions for years 2018 through 2025, so even the legal fees prorated to the taxable Social Security award aren’t deductible during this period.