Attorney fees, taxable costs, and litigation expenses are three separate categories of legal spending, and the rules for who ultimately pays each one are different. Attorney fees pay for your lawyer’s professional time. Taxable costs are a short, statute-defined list of charges a court can order the losing side to reimburse. Litigation expenses are everything else a case consumes, from expert witnesses to mediation, and they almost always stay with the party who spent the money. Treating the three as one bucket is how litigants end up surprised by their final bill.
What Attorney Fees Cover
Attorney fees are what you pay for a lawyer’s knowledge, judgment, and time. They cover legal research, drafting, negotiation, court appearances, and strategic advice. They do not cover the physical overhead of running a lawsuit, such as filing charges, transcripts, or hiring expert witnesses. Well-run billing statements separate the hours a lawyer spent thinking and writing from those other line items, which makes bills easier to challenge and easier for a court to evaluate if the fees are ever reviewed.
The fee structure varies. Hourly billing is the most common. Contingency fees, where the lawyer takes a percentage of any recovery and nothing if you lose, are standard in personal injury work. Flat fees apply to predictable tasks like drafting a will or filing an uncontested bankruptcy. Whatever the arrangement, it should be set out in a written retainer agreement before any work begins. That agreement is your primary protection if a billing dispute comes up later, and it should state the rate or percentage, which expenses the firm advances versus passes through, and how any unused funds are returned.
Under the default rule in American courts, you pay your own attorney, win or lose. Fee shifting happens only in specific circumstances covered further down.
Taxable Costs: The Short Statutory List
Taxable costs are the one category of litigation spending a court routinely shifts to the losing party. In federal court, the list is defined by 28 U.S.C. § 1920, and it is short:1Office of the Law Revision Counsel. 28 USC 1920 – Taxation of Costs
- Clerk and marshal fees, including filing charges and service of process.
- Transcripts necessarily obtained for use in the case. Federal court reporter rates cap at $4.40 per page for an ordinary 30-day transcript and $8.70 per page for two-hour rush delivery.2United States Courts. Federal Court Reporting Program
- Printing costs and witness fees. Witness attendance is set at $40 per day under 28 U.S.C. § 1821, plus reimbursement for travel by the shortest practical route and a subsistence allowance when an overnight stay is required.3Office of the Law Revision Counsel. 28 USC 1821 – Per Diem and Mileage Generally, Subsistence
- Copies and exemplification of materials necessarily obtained for the case, which courts have interpreted to include certain electronically stored information.
- Docket fees.
- Compensation for court-appointed experts and interpreters.1Office of the Law Revision Counsel. 28 USC 1920 – Taxation of Costs
The expert line is where many litigants misread the rule. Court-appointed expert fees are taxable. The fees you pay to your own privately retained expert are not. If you win, the losing side owes only the $40 statutory attendance fee for the days that witness appeared, no matter what the expert actually charged you. The gap between what experts bill and what you can recover is one of the biggest budget traps in litigation.
Witness travel is a different matter. Common-carrier fares and overnight subsistence for a testifying witness are recoverable under § 1821. Your own attorney’s travel to take depositions is not.
Because the statutory list is so narrow, total taxed costs are usually a small fraction of what either side actually spent. A party who invested tens of thousands of dollars in depositions, expert reports, and electronic discovery might recover only a few hundred dollars after the clerk taxes costs. Knowing that in advance changes how a case gets budgeted.
Litigation Expenses: Everything Else You Pay For
Litigation expenses are the catch-all category: real spending that keeps a case moving but falls outside § 1920. These costs are almost always non-recoverable from the other side, regardless of who wins.
Privately retained expert witnesses sit at the top of the list. A medical specialist, forensic accountant, or engineering consultant commonly bills $300 to over $1,000 per hour for review time, report preparation, and testimony. The only slice that can be shifted is the $40-per-day attendance fee. The rest stays on your tab.
Mediation fees are another substantial line item. A full-day session with an experienced mediator typically costs each side $2,000 to $5,000. Many courts require mediation before trial, so this spending is effectively mandatory, yet it cannot be taxed as a cost.
Legal research platforms, process server fees beyond basic service, long-distance communications, and courier charges for expedited filings accumulate throughout a case and sit in the same non-recoverable bucket.
Electronic Discovery
E-discovery has become one of the largest expense categories in cases involving electronic records. Collecting, processing, reviewing, and producing electronically stored information requires specialized vendors. A Winter 2026 industry pricing survey found that roughly 43% of vendors charge less than $15 per gigabyte per month for processing and hosting, while about 32% charge between $15 and $25 per gigabyte.4EDRM. Processing Pricing Per GB and Cost Per Month to Host ESI with Analytics, Winter 2026 In a case covering hundreds of gigabytes, those per-unit costs add up quickly.
Section 1920 does allow recovery for copies of materials necessarily obtained for use in the case, but courts have read that provision narrowly. Routine e-discovery processing and hosting fees generally do not qualify. The copying provision covers specific document production, not the broader infrastructure of searching and managing electronic data. The party generating the largest e-discovery bills typically bears those costs regardless of outcome.
Who Actually Pays: The American Rule and Its Exceptions
The baseline rule in the United States is that each side pays its own attorney fees, win or lose. This default, known as the American Rule, keeps the risk of a lawsuit from being used as a weapon that scares off valid claims. It applies unless something specific overrides it. Three exceptions matter.
Statutory Fee Shifting
Congress has written fee-shifting provisions into statutes where it wanted to encourage private enforcement. The most prominent is 42 U.S.C. § 1988, which allows courts to award reasonable attorney fees to prevailing parties in civil rights cases brought under Section 1983, the Civil Rights Act of 1964, the Americans with Disabilities Act, the Fair Housing Act, and related federal statutes. That same statute allows courts to include expert fees as part of the award in certain civil rights actions, which is a rare exception to the usual rule that privately retained expert costs are non-recoverable.5Office of the Law Revision Counsel. 42 USC 1988 – Proceedings in Vindication of Civil Rights Environmental, consumer protection, and employment discrimination statutes often contain similar provisions.
Contractual Fee Shifting
Many commercial contracts, leases, and loan agreements include a clause stating that the prevailing party in any dispute may recover reasonable attorney fees. If you signed one, that clause overrides the American Rule for disputes arising under the agreement. Courts enforce these clauses but still review billing records to confirm that the hours were necessary and the rates reasonable. Before filing or defending a lawsuit, check every relevant agreement for fee-shifting language. It changes the risk calculus for both sides.
Court-Ordered Fees for Bad Conduct
Courts retain inherent authority to award attorney fees as a sanction when a party litigates in bad faith, pursues frivolous claims, or engages in abusive discovery. These awards are punitive, discretionary, and uncommon, but they represent a fee-shifting risk even when no statute or contract applies.
Filing a Bill of Costs After You Win
Federal Rule of Civil Procedure 54(d)(1) gives the prevailing party the right to recover costs but does not set a specific filing deadline. That deadline comes from each district court’s local rules, which vary.6Legal Information Institute (LII). Federal Rule of Civil Procedure 54 – Judgment, Costs Missing the local deadline can forfeit your right to recover costs entirely, so checking the applicable local rule immediately after a favorable judgment matters.
Once the clerk taxes the costs, any party has seven days to ask the judge to review the clerk’s decision. The clerk reviews the submitted costs against § 1920 and strikes anything that falls outside the statute, which is where most trimming of a bill of costs happens.
How Each Category Is Taxed
The three buckets are also treated differently on your tax return, and that matters most when you have paid attorney fees out of a recovery.
The Contingency Fee Trap
If you win a lawsuit on contingency, the IRS treats the full settlement or judgment as your gross income, including the share that goes directly to your attorney. The Supreme Court confirmed this in Commissioner v. Banks, holding that a plaintiff must recognize the full recovery amount even when the lawyer’s share is paid from the settlement before the plaintiff ever touches the money.7Justia Law. Commissioner v. Banks, 543 U.S. 426 (2005) Payors must report the full amount on information returns to both you and your attorney.8Internal Revenue Service. Tax Implications of Settlements and Judgments Without a deduction, you would owe tax on money you never received.
The Above-the-Line Deduction for Employment and Civil Rights Claims
Federal law provides an above-the-line deduction for attorney fees and court costs paid in connection with employment discrimination, civil rights, and whistleblower claims. This deduction reduces adjusted gross income directly, so the attorney’s share does not inflate your AGI and trigger phaseouts of other tax benefits. The deduction cannot exceed the amount you included in income from the lawsuit in that tax year. Qualifying claims are broad: any action under federal, state, or local law enforcing civil rights or regulating the employment relationship, including wage, benefit, and retaliation claims. IRS, SEC, and state false claims act whistleblower claims also qualify.9Office of the Law Revision Counsel. 26 US Code 62 – Adjusted Gross Income Defined
The 2026 Change for Everything Else
For legal fees tied to claims that do not fall into the employment, civil rights, or whistleblower categories, the Tax Cuts and Jobs Act eliminated the deduction starting in 2018 by suspending miscellaneous itemized deductions. That suspension expires on December 31, 2025.10Congressional Research Service. Expiring Provisions in the Tax Cuts and Jobs Act (TCJA, P.L. 115-97) Starting in 2026, taxpayers who itemize may again deduct miscellaneous expenses, including certain legal fees, to the extent those expenses collectively exceed 2% of adjusted gross income. That is a meaningful shift for anyone paying legal fees in property disputes, estate litigation, or business-related claims outside the above-the-line categories. Whether Congress extends the suspension before expiration remains uncertain, so the current status is worth checking before filing.