Where do I deduct qualified attorney's fees?

[neon2lsohc]

Discrimination Case (I've checked code, this software is just unnecessarily dumbed-down). Also recovered compensatory damages to reimburse for unnecessary finance charges (due to discrimination), which are deductible. I'be spent an extra week trying to overcome this frustration. Wishing I'd entered all this BS into TaxAct. I'd be gone already if I felt like re-entering.

[JohnB5677 · Accepted solution]

Fees related to unlawful discrimination claims should be deducted on your tax return.

To enter your qualifying legal fees from an employment discrimination suit in TurboTax Online,

• Go to Wages & Income
• Scroll down to Less Common Income, 
• Next to Miscellaneous Income,  
• Select  Other reportable income 
• Description "Qualifying Legal Fees," and
• Enter the amount as a negative number. 

The deduction will appear as an “above the line” deduction and will be deducted from your gross income.

[MandyJean]

In the event I received a 1099 MISC for the attorney fees portion of an employment discrimination lawsuit settlement, would I enter the amount as income under 1099 MISC and then again as an above the line deduction other Less Common Income to offset or would I enter it under the less common income section ONLY ? 

[JamesG1]

You would enter the amount of income reported on an IRS form 1099-MISC.  Then you would make the entry for qualified attorney's fees above the line deduction under Less Common Income as outlined by @JohnB5677.

If you received an IRS form 1099-MISC for a lawsuit settlement with income in box 3, the income is likely taxable as other income.

1. In TurboTax Online, in the search magnifying glass in the upper right hand corner of the screen, search for 1099-misc and select the Jump to link
2. If you're asked Did you get a 1099-MISC?, answer Yes
   1. If you've already entered a 1099-MISC, select Add Another 1099-MISC
3. Enter the information from your 1099-MISC and select Continue
4. On the Describe the reason for this 1099-MISC screen,
   enter lawsuit settlement and select Continue
5. On the Does one of these uncommon situations apply? screen, select This was money from a lawsuit settlement and then answer the back wages question before selecting Continue.

You may view the entries at Tax Tools / Tools / View Tax Summary / Preview my 1040 or at Tax Tools / Print Center / Print, save or preview this year's return / Include government and TurboTax worksheets  after you have paid for the software.

@MandyJean 

[pjdeasy]

I tried this method on my Turbotax 2023 filing.  It does not work, saying I can't put in a negative number.  When I place into "legal fees" on the deduction section it says 'We'll let you know after we gather some more info.' but it does not give any forwarding to where they gather more information.  This is for a civil rights case and I live in Arizona.

[LindaS5247]

Try doing this to enter your legal fees for your civil rights case:

1. Select Forms in the top right
2. In the left column (Forms in My Return) select Schedule 1
3. Highlight line 24h and tap the magnifying glass
4. Scroll up to the Other Adjustments to Income Smart Worksheet between lines 23 and 24
5. Enter your amount on line K

You may be able to deduct, as an adjustment to income on your Schedule 1 (Form 1040), attorney fees and court costs for actions settled or decided after October 22, 2004, involving a claim of unlawful discrimination, a claim against the U.S. Government, or a claim made under section 1862(b)(3)(A) of the Social Security Act.

However, the amount you can deduct on your Schedule 1 (Form 1040), is limited to the amount of the judgment or settlement you are including in income for the tax year.