The only time legal fees are deductible "above the line" is a settlement for unlawful discrimination. But there are a lot of other factors to consider.
Settlements for physical injury are not taxable to begin with. Settlement for property damage is not taxable unless the recovery is more than the adjusted cost basis of the property. Settlements for pain and suffering are not taxable if the original injury was physical, but are taxable if the original cause was not a physical illness or injury. Settlement money for lost wages is taxable as wages and you should receive a W-2 with deductions for medicare and social security taxes.
Legal fees associated with most settlements are not deductible, so if you received $10,000 and had $5000 of legal fees, you are still taxed on the full $10,000 even though you did not receive it, and you may not net very much in the end. Legal fees for unlawful discrimination are deductible "above the line" and we can tell you where to do that in Turbotax. But it depends on what your settlement was for.
https://www.irs.gov/government-entities/tax-implications-of-settlements-and-judgments
This answer has been verified for accuracy by an Intuit expert employee
