1099-MISC for Calif Lemon Law

[justbrowneyes]

We received a settlement from Ford, which the attorney received, they took their fees and gave us the rest and we gave Ford the car. Is the value of the car deductible as well as the attorney fees? I have conflicting information. Would it be the same for Federal and State.

[SabrinaD2]

Attorney Fees: Generally, attorney fees related to a settlement are deductible if the settlement itself is taxable. However, for personal settlements, these fees aren't deductible under federal tax law

For more details, you can refer to the IRS guidelines on settlements and judgments and the TurboTax article on deducting legal fees

Value of the Car: If the car was part of the settlement and you gave it back to Ford, the value of the car is generally not deductible unless it was a business asset. The settlement amount you received, minus the attorney fees, would typically be considered taxable income if it does not fall under any exclusions (e.g., personal physical injury)

Federal vs. State: Federal tax laws generally apply uniformly, but state tax laws can vary.

To help you determine the taxability of your settlement, you can use this Settlement Tax Calculator.