I need to know how I would claim a Lemon Law settlement or should I say. How do i.report it

It depends.  Did you receive a tax form for it or did you have a gain on the sale?

 

Only the amount that is above what you paid is taxable.  So, if you paid $40,000 for the vehicle and you received $40,000, this would not be taxable.  

 

If you paid $40,000 for it but received $50,000, then $10,000 would be taxable income.  If you held the vehicle for more than a year, this would be a capital gains transaction instead of ordinary income.  Meaning it would be taxed as a Capital Gains Sale.

 

If you paid $40,000 and received $30,000, then you would have a loss and this would not affect your taxes.  If you received a 1099 Misc or NEC, then you would need to enter it and then back the income out by following the steps above, however, if it is a personal vehicle, the loss would not be deductible. 

 

 

 

You would enter the lemon law sale or if you received a 1099-S by clicking the following:

1. Federal
2. Income
3. Show More next to Investment Income
4. Start next to Stocks, Cryptocurrency, Mutual Funds, Bonds, Other (1099-B) 
5. Select Other
6. Continue through and select land for the type of investment
7. Answer how you obtained it
8. You will need to enter the selling price, dates and the cost basis   

Note, your navigation sequence may be slightly different.  You can also use the Jump to feature by entering investment sale in the search bar at the top of the screen. 

 

 

 If you received a 1099-Misc or 1099-NEC for it, even if you had no gain or had a loss, you would still need to enter the 1099 and then back the income out. To enter the 1099 take the following steps:

• Income
• 1099-MIsc under Other Common Income
• Enter the information from the 1099-MIsc
• Continue through and say the work does NOT involve work that is like your main job
• Select the years you received it
• Say no, to did this involve an intent to earn money

Then you will take the following steps to remove the income:

• Income
• Less Common Income
• Miscellaneous Income
• Other Reportable Income
• Answer Yes to Any Other Taxable Income
• Enter the description such as 1099 received for no gain lemon law
• Enter the amount on the 1099 as a negative number.