Title company sent 1099 MISC for reimbursement of legal fees through settlement. I see to enter 1099 MISC in income section but where is the offsetting expense that I paid entered? This is not new income but a reimbursement of expenses already paid out of pocket.
Prior to 2018, legal fees could be deducted as a miscellaneous expense subject to a 2% adjusted gross income limitation. The Tax Cuts and Jobs Act of 2017 eliminated miscellaneous itemized deductions as part of individual tax reform.
For tax years 2018 through 2025, miscellaneous itemized expenses subject to the 2% adjusted gross income limitations are not allowed. Therefore, most legal fees and court costs cannot be deducted. These costs cannot be netted against income from a legal settlement.
Fees that you pay to professionals, such as attorneys and accountants, are deductible when they relate to your ongoing business.
The simple answer is: there are not deductible expenses for the income you receive. The attorney fees you paid, with the money, were personal expenses and not business (income producing) expenses.
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First off - thanks so much for the help. Just to add more clarity to ensure we’re aligned .... these are personal expenses vs business. In an ongoing lawsuit, I incurred $20k in out of pocket legal fees. Ultimately the two parties agreed to drop the suit in exchange for reimbursement of the $20k. The settling company sent me a 1099 Misc. I am essentially paying tax twice on those dollars as it stands now. Am I just stuck?