RLW1
New Member

Do I need to add attorney fees if they were paid out of a settlement received?

 
BreaunnaL
Intuit Alumni

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It depends on the nature of the fees, as only fees in regards to taxable income or tax are deductible.

Legal Fees you can deduct:

  • Court costs and attorney fees related to either doing or keeping your job, including back pay, injury to reputation, and unlawful discrimination claims
  • Costs of collecting taxable alimony or arranging details of alimony payments
  • Fees for tax advice related to a divorce, if the bill specifies how much is for tax advice. You cannot deduct any other legal fees related to a divorce or child support since they are personal expenses not related to taxable income.
  • Fees for personal injury actions where you recover taxable damages
  • Estate tax planning fees related to tax planning or income-producing property
  • Costs of collecting taxable Social Security benefits
  •  Fees to recover income-producing property such as stocks or bonds loaned as collateral

 

Legal fees you cannot deduct:

  • Expenses for personal lawsuits unless you recover taxable damages
  • Legal fees for personal injury awards that are tax-free
  • Legal costs related to the acquisition or determination of title to property. However, you may add these costs to the basis of the property, which becomes important when you sell the property, or if you depreciate it.
  • The costs of contesting a will. This is because an inheritance is not taxable income.
  • Legal fees for divorce or child support actions, other than those stated above as eligible.


Data entry in TurboTax to deduct legal fees:

  1. Federal Taxes
  2. Deductions and Credits
  3. Scroll down to Other Deductions and Credits
  4. Select Legal Fees
agnor69
New Member

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I know its been awhile where do you put the legal fees

ToddL99
Expert Alumni

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Enter deductible legal fees on Line 8 of Schedule 1, Form 1040.  See page 94 of TAX YEAR 2020 1040 and 1040-SR INSTRUCTIONS for guidance on deductibility.

 

To enter the legal fees:   

  • Type "other reportable income" in the search window (or in the Search Topic window for desktop versions) 

  • Click on "jump to other reportable income"  (or "other reportable income" in the Search Topic results) 

  • Answer "No" to "Did you receive any other wages?" 

  • Select "Other reportable income" from the Miscellaneous income list 

  • Select Add another Income item  on the Other Miscellaneous Income Summary screen 

  • Enter a Description and amount (in negative numbers),  then click on Continue 

A corresponding negative amount will be entered on line 8 of Schedule 1 and Form 1040.