How to bill for AI-assisted legal work: hourly time, flat fees, tool costs and disclosure

If you bill by the hour, bill the time you actually spent, including the time you spent prompting the tool and checking its output, and not the time the work would have taken without it. Most AI subscriptions are overhead. A per-use charge incurred for one client’s matter can usually be passed through at cost. Whatever you charge, explain the basis to the client before you bill it, preferably in writing.

That is the reading of ABA Formal Opinion 512, issued July 29, 2024, and of the state bar guidance below. Ethics opinions are guidance, not law. Your state’s version of the fee rule controls, and state bars do not all agree on the details. For the rest of the opinion, see ABA Formal Opinion 512 explained.

What rule governs AI-related fees?

Model Rule 1.5(a) says a lawyer shall not charge “an unreasonable fee or an unreasonable amount for expenses.” It lists eight factors for judging reasonableness. The first is “the time and labor required.” Others include the customary fee in the locality, the results obtained and whether the fee is fixed or contingent.

Rule 1.5(b) requires the lawyer to communicate the basis or rate of the fee and expenses, “preferably in writing,” before or within a reasonable time after the representation starts. Changes to the basis or rate must also be communicated.

Opinion 512 applies both parts to AI. Nothing in it creates a new rule. It applies the ABA’s 1993 billing opinion, Formal Opinion 93-379, to a new kind of tool.

Can I bill hourly for time AI saved me?

No, according to every opinion covered here.

Opinion 512 says lawyers who bill hourly “must bill for their actual time.” Its example is a pleading. If a lawyer spends 15 minutes entering information into an AI tool, the lawyer may bill those 15 minutes plus the time spent reviewing the draft for accuracy and completeness.

The Texas Professional Ethics Committee’s Opinion 705, issued February 2025, says the same. A lawyer may bill the actual time spent using the tool, refining its output and checking the work. A lawyer “may not, however, charge hourly fees for the time that was ‘saved.’”

The North Carolina State Bar’s 2024 Formal Ethics Opinion 1, adopted November 1, 2024, uses a concrete case. An estate planning lawyer billing $300 an hour used to spend about three hours on standard documents. With AI, it takes one hour. The opinion says the lawyer may not bill three hours. The lawyer keeps the benefit of the efficiency by doing more work for more clients.

The State Bar of California’s 2026 Practical Guidance, which replaces its 2023 version, lists the billable work: crafting and refining prompts, and reviewing and editing output.

Review time deserves care. It is billable, and it is the step that catches fabricated citations. The Record tracks court decisions where that step was skipped.

Can I bill for time spent learning an AI tool?

Usually not. Opinion 512 says a lawyer may not charge a client to learn a tool the lawyer will use regularly for clients, because keeping up with technology is part of the duty of competence under Rule 1.1.

There is one exception. If a client explicitly asks you to use a specific tool you do not know, Opinion 512 says it may be appropriate to bill for learning it. Agree on those terms with the client first, and preferably put them in writing.

Can I charge clients for AI tool costs?

It depends on what the tool is and how you pay for it. Opinion 512 sorts costs into three groups.

Overhead. A tool that works like equipping and maintaining a practice is overhead. Do not bill it unless you told the client otherwise in advance. The opinion’s example is an AI grammar checker built into word processing software.

Matter-specific expenses. If a third-party provider charges per use to review thousands of contracts for one client, the opinion says it would ordinarily be reasonable to bill the actual out-of-pocket cost. Absent contrary disclosure, do not add a surcharge, and pass along any discounts.

In-house tools. A firm that built its own AI tool may agree with the client in advance on specific rates. Without an agreement, the firm may charge no more than direct cost plus a reasonable allocation of directly associated expenses. Opinion 512 adds that the charge must not duplicate other charges to this or other clients.

State guidance mostly tracks this. California’s guidance says subscriptions for general drafting, research or document review tools are typically overhead. It allows charging per-use fees and custom implementations for a particular matter, if the fee agreement discloses that AI costs may be billed separately. California adds that no markup is allowed without the client’s informed written consent. Texas Opinion 705 compares per-use AI fees to Westlaw and LexisNexis charges. A lawyer may collect them if the client accepts the arrangement, and generally no more than the amount actually paid.

North Carolina goes further than the ABA. With client consent, preferably in writing, it allows a general administrative fee covering generic expenses such as copies, postage and general technology, including AI. A lawyer in another state should not assume that approach is allowed there.

Can I use flat fees or value pricing instead?

Yes. The ABA, North Carolina and California all allow it, with a limit.

Opinion 512 says the Rule 1.5(a) factors still apply to flat and contingent fees. If AI lets a lawyer finish tasks much more quickly, charging the same flat fee as before “may be unreasonable.” It cites a Maryland case holding that a fee charged for little or no work is unreasonable.

North Carolina says a lawyer may consider a flat fee for drafting, even with AI, if the fee is not clearly excessive and the client consents to the structure. California suggests flat fees for predictable assignments and building AI time savings into competitive rates.

None of these opinions uses the phrase “value pricing.” They test any fixed price against the Rule 1.5(a) factors. The time and labor required is one factor. Results obtained and the customary fee in the locality are others. A flat fee can reflect more than hours, but it cannot ignore that the work now takes far less of them.

Many small firms already offer flat fees. Clio’s 2025 Legal Trends for Solo and Small Law Firms report, released May 8, 2025, found that 75% of solo firms and 65% of small firms offer flat fees alongside hourly rates. Clio’s announcement also says the report puts the revenue erosion facing lawyers who stick to traditional billing models at potentially up to $27,000 per lawyer per year. That figure is Clio’s estimate, not a measured loss.

What does the guidance say about each billing approach?

Approach	What the guidance says	Sources
Hourly, time actually spent	Allowed. Prompting, refining and reviewing output are billable.	ABA 512; California; Texas 705
Hourly, time “saved”	Not allowed. Bill actual time, not the time the work would have taken.	ABA 512; Texas 705; North Carolina 2024 FEO 1
Learning a tool	Not billable for tools used regularly. Possibly billable if the client asks for a specific tool, with agreement first.	ABA 512
Flat fee	Allowed, but Rule 1.5(a) still applies. The same fee after AI cuts the work sharply may be unreasonable.	ABA 512; North Carolina; California
General AI subscription	Overhead. Do not bill it absent advance disclosure to the client.	ABA 512; California
Per-use AI charge for one matter	Ordinarily billable as an expense at actual cost, with disclosure and no markup absent agreement.	ABA 512; California; Texas 705
In-house AI tool	Rates may be agreed in advance. Otherwise direct cost plus a reasonable allocation, not duplicated.	ABA 512
General administrative fee including AI	Allowed in North Carolina with client consent. Not addressed this way by the ABA.	North Carolina 2024 FEO 1

Do I have to tell clients I use AI?

Not always. You do when it affects the fee.

Opinion 512 says whether Rule 1.4 requires disclosing AI use depends on the facts. But it says lawyers must consult clients “when the use of a GAI tool is relevant to the basis or reasonableness of a lawyer’s fee.” Its fees section says that before charging for AI tools or services, the lawyer must explain the basis for the charge, preferably in writing. You must also disclose your AI practices if a client asks, or if the engagement terms or outside counsel guidelines require it.

North Carolina says that if a decision to use or not use an AI tool needs the client’s input on fees, the lawyer must inform the client and seek that input. California says fee agreements should explain how fees and costs are calculated and how far AI factors into the lawyer’s rates.

What should I change in my engagement letter?

Four things follow from the guidance above.

1. Say whether AI costs will be billed separately, and how. California’s guidance expects this for any separate charge.
2. If you pass through per-use AI charges, say they are billed at actual cost. Add a markup only with the client’s agreement.
3. If you use flat fees, set them for work as you do it now, with AI, not as you did it before.
4. If you change how you bill an existing client because of AI, tell them. Rule 1.5(b) requires that changes in the basis or rate be communicated.

Then check your own state’s rule and opinions. The ABA and the three states here agree on hourly billing. They differ on overhead, administrative fees and how much consent a separate AI charge needs.