How do I enter the adjustment to income, an above the line deduction, for my legal fees incurred in a successful retaliation claim against my employer?

[rjs]

You can only claim the adjustment if your claim against your employer was for unlawful discrimination.

Officially TurboTax does not support the adjustment, or "above-the-line deduction," for attorney fees for an unlawful discrimination claim. It's listed in the Unsupported Calculations document. Nevertheless, it can be entered in TurboTax for 2025, but only in forms mode. Forms mode is available only in the TurboTax Desktop software, not in TurboTax Online, so there is no way to make the entry in TurboTax Online.

Here's how to enter the above-the-line deduction for attorney fees for an unlawful discrimination claim in TurboTax Desktop for 2025. In forms mode open the "Form 1040 or Form 1040SR Worksheet" (1040/1040SR Wks). Scroll down to the Schedule 1 section (Additional Income and Adjustments to Income), then to Part II Adjustments to Income, and then to the Other Adjustments to Income Smart Worksheet between lines 23 and 24. Enter the attorney fees on line K of the Smart Worksheet. The deduction will then appear on Schedule 1 line 24h.

Refer to IRS Publication 525 for important additional information about this adjustment.

[mattmarshallcycling]

I did it this way in the online mode, not the forms mode. It got the deduction in, but it does not add my description next to the negative number. What do you think?

Enter it as a workaround in the income section:

1. Go to the Federal section → Wages & Income (or search for "miscellaneous income" or "other income").
2. Find and select Less Common Income → Miscellaneous Income, 1099-A, 1099-C (or similar; look for "Other reportable income" or "Other taxable income").
3. When prompted for other taxable income or miscellaneous income, enter a description like "Qualifying Legal Fees" or "Deductible Attorney Fees - Unlawful Discrimination".
4. Enter the amount of your legal fees as a negative number (e.g., -5000 if fees were $5,000). This subtracts it from your gross income as an above-the-line adjustment.
5. Continue through the interview. The negative entry should flow to Schedule 1, line 8z (other income adjustments) or appear in a way that reduces your adjusted gross income (preview your 1040 to confirm it affects the correct line or effectively reduces AGI).

[rjs]

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@mattmarshallcycling wrote:

I did it this way in the online mode, not the forms mode. It got the deduction in, but it does not add my description next to the negative number. What do you think?

@mattmarshallcycling 

What I think is that I wouldn't use that workaround. It gets the net result that you want, but the tax return is not correct. There is a line on Schedule 1 specifically for the adjustment that you want to claim. It's line 24h. But you're not putting it on that line. With no description on line 8z, the IRS is going to wonder why you are reporting negative other income. You'll probably get an IRS notice about it, or they might even reject your e-file.

(The description that you enter appears on the "Other Income Statement." That statement should be included in your tax return, and Schedule 1 line 8z should reference the statement, but apparently TurboTax doesn't do that.)