If the settlement was based on unlawful discrimination, the attorney fees may be deducted.
TurboTax does not support listing that deduction on Schedule 1 Line 24h but you can report it on Schedule 1 Line 24z with a description using the TurboTax software by following the steps below:
Enter the 1099-MISC under
Wages & Income
1099-MISC and Other Common Income
Income from Form 1099-MISC START
Once that entry is done, go to:
Wages & Income
Less Common Income
Miscellaneous Income, 1099-A, 1099-C
Other reportable income START
Type "Attorney Fees" or something similar for the Description
Enter the amount of the attorney fees AS A NEGATIVE NUMBER (put a minus sign in front (-) )
According to the IRS:
“Enter attorney fees and court costs for actions involving certain unlawful discrimination claims, but only to the extent of gross income from such actions”
According to the IRS:
“You may be able to deduct attorney fees and court costs paid to recover a judgment or settlement for a claim of unlawful discrimination under various provisions of federal, state, and local law listed in section 62(e), a claim against the U.S. Government, or a claim under section 1862(b)(3)(A) of the Social Security Act. You can claim this deduction as an adjustment to income on Schedule 1 (Form 1040), line 24h. The following rules apply.
• The attorney fees and court costs may be paid by you or on your behalf in connection with the claim for unlawful discrimination, the claim against the U.S. Government, or the claim under section 1862(b)(3)(A) of the Social Security Act.
• The deduction you're claiming can't be more than the amount of the judgment or settlement you're including in income for the tax year.
• The judgment or settlement to which your attorney fees and court costs apply must occur after October 22, 2004.”
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