I received a taxable 1099-MISC settlement for unlawful discrimination. Can I claim legal fees above-the-line under IRC §62(e)(18) in TurboTax Online and how to enter?

[jenxue329]

I received a taxable settlement for an unlawful discrimination claim, reported on 1099-MISC Box 3, and paid attorney fees and court costs related to the case. I itemize deductions on my federal return. Under IRC §62(e)(18), I understand that these attorney fees may be deductible above-the-line, even though employee legal fees are generally not deductible on Schedule A under TCJA (2018–2025). How can I claim this deduction in TurboTax Online, if possible?

[DianeW777 · Accepted solution]

First, review the discrimination claim that you might fall under. If your unlawful discrimination falls into one of the categories listed you can follow the instructions to enter the deduction. Your description should include UDC (unlawful discrimination claim). The income will be on the return from the 1099-MISC.

Other Miscellaneous Income:

1. Sign into your TurboTax Online account
2. Go to Tax Home (left panel)  Wages and Income  section
3. Scroll to  Less Common Income > Select  Miscellaneous Income, 1099-A, 1099-C
4. Select Other reportable Income > Enter a description (----) and the amount as a negative (-10)

Unlawful Discrimination

The above-the-line deduction applies to attorney fees paid because of claims of “unlawful discrimination.” 

The definition of such claims refers to claims for unlawful discrimination brought under these federal statutes:

• the Civil Rights Act of 1991;
• the Congressional Accountability Act of 1995;
• the National Labor Relations Act;
• the Fair Labor Standards Act of 1938;
• the Age Discrimination in Employment Act of 1967;
• the Rehabilitation Act of 1973;
• the Employee Retirement Income Security Act of 1974;
• the Education Amendments of 1972;
• the Employee Polygraph Protection Act of 1988;
• the Worker Adjustment and Retraining Notification Act;
• the Family and Medical Leave Act of 1993;
• chapter 43 of Title 38 (concerning employment rights of uniformed service personnel);
• Section 1981, Section 1983, and Section 1985;
• the Civil Rights Act of 1964;
• the Fair Housing Act; and
• the Americans with Disabilities Act of 1990.
  • Tax Implications of Settlements and Judgements

@jenxue329

[Edited: 02/29/2026 | 4:20 PM PST]