Is Bail Tax Deductible?

Getting arrested in Jefferson County or Denver County is stressfuil enough without having to worry about whether it will somehow impact your taxes. But if you've paid a lot of money to get out of jail, or to help someone else get out of jail, it does raise an intriguing question: Can you claim that expense as a deduction on your taxes?

In this guide, the team at Tayler Made Bail Bonds takes a close look at the question of whether money paid out as bail, or as a fee to the bail bond agent, can be deducted from your taxes at the end of the year.

First Things First: What Exactly is Bail?

When a person is arrested, they are usually informed of a bail amount. This amount is either drawn from a bail schedule in the jail or is set by the court during a later bail hearing. The bail itself is neither a fine nor a punishment, but instead is nothing more than a way to ensure the accused will appear in court to face the charges against them. And there are several types of bail:

• Cash bail, which is when the accused or someone working with them pays the full bail amount in cash to the court. This money will be returned in full when the accused has satisfied their obligations to appear in court.
• If you or those helping you cannot afford to pay the full bail amount in cash, the bailbond agent will step in and cover the full bail amount for you in the form of a bail bond. In return for their services, the bondsman is paid a non-refundable fee that typically amounts to 10-15% of the bail amount.
• The property bond is when the defendant or the person helping them puts up property as collateral to satisfy the bail requirement.

Will the IRS Allow You to Deduct Bail?

As a general rule, no. Bail in whatever form is almost never tax-deductible. Why? There are two main reasons:

• The IRS sees bail as a personal expense, not as a business expense. The system only allows you to deduct those things that are directly related to earning income through a job or through running a business. Bail does not count as either.
• They don't like that it is connected to a legal issue. Just as you cannot deduct the cost of a speeding ticket or other fine, penalty or payment you cannot deduct bail because it is related to criminal charges, even if those criminal charges are misdemeanors.

In short, the IRS views posting bail as a matter of personal responsibility and choice that has nothing to do with your income.

Can I Deduct the Fee I Pay to the Bondsman?

Most people choose to work with a bail company in order to secure the release of themselves or their loved one. The bondsman's fee, while modest in terms of the overall bail amount, can still be fairly considerable if the bail amount stretches into 5 or 6 figures. As such, a lot of folks wonder if they can deduct that fee, even if they can't deduct the whole bail amount.

Unfortunately, it is not deductible as it too is considered part of the cost of dealing with a legal issue and has nothing to do with you making money. And for the record, if you used a credit card to pay bail, you cannot deduct that interest either.

Why Are Legal Fees Deductible but Bail and Related Fees Are Not?

A lot of people get confused as to why they can sometimes deduct the legal fees associated with whatever crime they are accused of, but they cannot deduct the bail amount itself, even if it's all part of the same legal mess.

Bail is money you turn over to the state to hold as a guarantee that you will show up for your appointed court dates. Legal fees are payments you make to an attorney for professional services they render on your behalf. That's a significant difference. Even so, legal fees are not always considered deductible. It depends largely on what you are accused of.

For business owners, there may be extremely rare exceptions, such as being able to prove that any bail payment was made entirely for a business-related reason. Still, such an expense can be very hard to justify.

What About State Taxes?

The Colorado income tax system is tied inexorably to the federal tax system. Typically, when filing state taxes, you will start with your federal taxable income and proceed from there. That means if you were unable to include bail payments in the calculus for your federal taxes, you won't be able to do it for your state taxes. There are no obscure rules allowing for a special deduction for bail.

What if I Posted Bail for Someone Else?

If you posted bail for someone else, be it a friend or family member, you may wonder if you can count it on your taxes as a type of loan. But here's the thing: if the person ultimately repays you, then there is no net tax effect. If they don't, it is typically considered nothing but a bad personal debt and not deductible.

If you post bail for an employee or a critical vendor, you may have a case to deduct the bail bondsman fee from your taxes. Talk to you accountant for clarification.

The Bottom Line

So you see, no matter how you may try to turn the situation to your advantage and gain a legal tax deduction for bail and bail-related expenses, it won't work. Because bail has nothing to do with your income-generating activities. And the IRS has seen it all and is prepared for any and all types of arguments.

If bail was somehow a cost associated with earning money, it would be a different story, but it's not. So save yourself a lot of time and hassle by not expecting to somehow deduct bail-related expenses either from your Federal or Colorado taxes. And remember, if you go ahead and try to claim bail as a deduction on your taxes, your claim will not only be denied, but you will also attract the attention of tax authorities, and perhaps even trigger an audit.

For Reliable 24 hour Bail Bonds Trust Tayler Made

Don't ever approach a bail situation thinking you're going to get a tax deduction from it. You won't. However, if what you need is a bonding company that will help you gain your freedom or the freedom of a loved one in an affordable and expeditious manner, the ones to call are Tayler Made Bail Bonds. Our number is (303) 623-0399. We're here for you around the clock, so don't delay. Call now.