It depends on whether your settlement actually describes it as a discrimination settlement. The following links will help you review your specific situation.
The law has changed. Legal fees used to be a deduction under Miscellaneous Expenses when using itemized deductions and it was limited to the amount that exceeded 2% of adjusted gross income (AGI). Since the Tax Cuts and Jobs Act (TCJA) enactment this has been eliminated for tax years 2018-2025. It remains to be seen if it will automatically revert back in 2026. This may depend on what the legal fees are actually for.
If the proceeds were as a result of an employer discrimination lawsuit, you can deduct the legal expenses up to the amount of the proceeds as an adjustment to income.
Go to the Income and Expenses section of TurboTax
- Scroll to Less Common Income > Select Miscellaneous Income, 1099-A, 1099-C
- Select Other reportable Income > Enter a description and the amount of your legal fees as a negative number (-150 as example)
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