A contingency fee is a payment arrangement where your lawyer’s fee is a percentage of the money you recover, collected only if you win. You pay nothing upfront, and if the case produces no recovery, you typically owe no attorney’s fee. Most contingency percentages run between one-third and 40 percent, and the exact figure usually depends on how far the case has to travel before it resolves.
That is the headline. The details below decide what you actually walk away with.
The Percentage and When It Changes
Contingency fees in civil cases generally fall between 33 and 40 percent of the total recovery. On a $100,000 settlement at a standard one-third fee, the firm’s cut is roughly $33,333.
Many agreements use a sliding scale tied to the stage of the case:
- 33 percent if the case settles before a lawsuit is filed
- 35 to 37 percent if it settles after filing but before trial
- 40 percent if the case goes to trial or requires an appeal
The percentage climbs at each stage because litigation demands more attorney time once discovery, depositions, and courtroom work begin. The tiers should be stated plainly in your written fee agreement before any work starts.
What Else Comes Out of Your Recovery
The attorney’s percentage is not the only deduction. Cases run on out-of-pocket costs the firm advances and then recoups from the settlement. Court filing fees, expert witnesses, deposition transcripts, process servers, medical records, and mediation fees are the usual categories. Filing a new civil case in federal court currently costs $405. Medical expert witnesses commonly charge $350 to $500 per hour, and a court reporter’s transcript rates generally run $4.50 to $7.50 per page, with a full day of testimony producing hundreds of pages.
Over the life of a case, these expenses can add up to thousands of dollars. Your fee agreement should list which categories the firm expects to incur and how the costs will be handled at the end.
Gross Fee vs Net Fee Method
One clause matters more than most people realize: whether litigation costs are subtracted before or after the attorney’s percentage is calculated.
Under the gross fee method, the percentage is applied to the total settlement first, and costs come out after. On a $50,000 settlement with $5,000 in costs and a 33 percent fee, the fee is $16,500, costs are $5,000, and you keep $28,500.
Under the net fee method, costs are subtracted first, and the percentage is calculated on the balance. Same numbers: $50,000 minus $5,000 leaves $45,000, the fee is $14,850, and you keep $30,150. The net method puts an extra $1,650 in your pocket on that example. Confirm which method applies before you sign; the written contract must specify.1American Bar Association. Model Rules of Professional Conduct – Rule 1.5 Fees
Liens That Reduce Your Share
In personal injury cases especially, other parties may have a legal right to be repaid from your settlement before you see it.
- Health insurers who paid for injury-related care can demand reimbursement through subrogation.
- Hospitals and doctors with unpaid bills related to your injury may place a lien on the case.
- Medicare holds a priority right to recover any conditional payments it made for your injury-related care, and can recover up to the full settlement amount for benefits it paid. State Medicaid programs hold similar rights.2Centers for Medicare & Medicaid Services. Medicare Secondary Payer Manual – Chapter 7
- If you received workers’ compensation and later recover from a third party, the workers’ comp insurer can claim reimbursement.
Attorneys can often negotiate liens down, which directly increases your net. Ask about lien exposure early so your expected take-home number is realistic.
Taxes on What You Recover
Whether your settlement is taxed depends on the type of claim.
Damages for physical injuries or physical sickness are generally excluded from taxable income, including the portion paid to your attorney.3Office of the Law Revision Counsel. 26 U.S. Code 104 – Compensation for Injuries or Sickness Punitive damages are not covered by that exclusion, and emotional distress by itself does not qualify as a physical injury unless it stems from one.
Settlements in employment disputes, contract claims, defamation cases, and other non-physical-injury matters are generally taxable.4Internal Revenue Service. Tax Implications of Settlements and Judgments The IRS treats the full settlement as your income, including the share that went to your lawyer, and the payer typically issues 1099s to both of you. You can be taxed on money that never passed through your hands.
For most taxable settlements, you cannot deduct the attorney’s fee against that income. The 2017 Tax Cuts and Jobs Act eliminated the miscellaneous itemized deduction that previously allowed it. Two exceptions matter: employment discrimination cases (under a wide range of federal anti-discrimination statutes) and whistleblower awards allow you to deduct attorney fees and court costs as an above-the-line adjustment to gross income, up to the amount of the award included in your income.5Office of the Law Revision Counsel. 26 USC 62 – Adjusted Gross Income Defined Outside those categories, you may owe tax on the full settlement with no offset for the fee.
What the Written Agreement Must Spell Out
Ethics rules require every contingency fee arrangement to be in a signed written contract that covers specific terms:1American Bar Association. Model Rules of Professional Conduct – Rule 1.5 Fees
- The percentage and how it changes across stages (pre-suit, post-filing, trial, appeal)
- Whether costs are deducted before or after the fee percentage is applied
- Whether you owe litigation expenses if there is no recovery
- The categories of costs the firm expects to incur
When the case ends, the attorney must give you a written statement showing the total recovery, the fee calculation, and an itemized list of expenses.
If You Lose
No recovery means no attorney’s fee. That is the core of the deal. The open question is litigation costs the firm already spent.
Under the Model Rules, a lawyer may advance court costs and litigation expenses, and the agreement can make repayment of those costs contingent on the outcome.6American Bar Association. Model Rules of Professional Conduct – Rule 1.8 Current Clients Specific Rules Many personal injury firms absorb costs on a losing case. Some agreements do not. Read the cost-responsibility provision before signing.
Firing Your Lawyer Mid-Case
You can discharge a contingency fee attorney at any time, for any reason, but that does not erase the value of work already done. The former attorney is typically entitled to compensation from any eventual recovery under quantum meruit, Latin for “what one has earned.” A court weighs factors like time spent, complexity, and the attorney’s experience to fix a reasonable amount.
The discharged attorney can also place a lien on the case. When you bring in a new lawyer, the new fee plus the former attorney’s claim generally cannot exceed the original contingency percentage, so you are not paying twice. If your original agreement called for 33 percent and the prior firm’s quantum meruit share is set at $10,000, the new attorney’s fee is reduced accordingly.
An attorney who withdraws voluntarily without good cause may forfeit any claim to fees. Rules vary by state, so ask a new lawyer how yours treats the handoff.
Where Contingency Fees Do Not Apply
Two categories are off-limits under the Model Rules that most states have adopted. Lawyers cannot charge a contingency fee to defend a criminal case, and they cannot use a contingency fee in domestic relations matters where the fee depends on securing a divorce or on the amount of alimony, support, or property division awarded.1American Bar Association. Model Rules of Professional Conduct – Rule 1.5 Fees
Certain federal claims cap the fee by statute, no matter what the private agreement says. Under the Federal Tort Claims Act, an attorney’s fee cannot exceed 25 percent of a court judgment or post-litigation settlement, and 20 percent of an administrative settlement reached before suit is filed. Charging more can bring a fine or up to one year in prison.7Office of the Law Revision Counsel. 28 U.S. Code 2678 – Attorney Fees; Penalty In Social Security disability cases in federal court, the fee is capped at 25 percent of past-due benefits.8Office of the Law Revision Counsel. 42 U.S. Code 406 – Representation of Claimants Before Commissioner Fee agreements approved through the Social Security Administration’s administrative process carry an additional dollar cap of $9,200 as of 2025, which stays in place unless the SSA publishes a notice raising it.9Federal Register. Maximum Dollar Limit in the Fee Agreement Process; Partial Rescission