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vehicle buyback lemon law settlement?

Received a 1099 MISC for the full settlement, how do i deduct the vehicles from the proceeds? i see many suggestions. 1 of them is to enter it as a capital gain if we had the vehicle more than a year? what and how do I enter it on turbo tax? 

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3 Replies
AmyC
Expert Alumni

vehicle buyback lemon law settlement?

You have several factors here.

 

  • If you sold or traded the vehicle as part of the settlement, you may have a capital gain. Determine your basis plus any improvements to calculate the gain.
  • However, if the settlement is simply a reimbursement for the purchase price and related expenses, it may not be considered taxable income.
  • Lemon law settlements often include compensation for the purchase price of the vehicle, any additional expenses incurred (like repairs), and possibly punitive damages. The tax treatment can vary based on what the settlement covers. You may want to contact your lawyer.

If you want to enter the 1099-MISC as a capital gain, you would enter the vehicle on Sch D, similar to a stock sale. In the program, select Other, like second home to make the entry. Enter the basis and sales price along with the purchase date and sale date.

 

The rest of this is not necessary but could help the IRS match up forms.

To be safe, you could also enter the 1099-MISC under 1099-MISC income and then subtract the money back out under other income with a description like 1099-MISC lawsuit reported as capital gain.

 

  1. go to the federal income section
  2. scroll to the bottom
  3. Miscellaneous Income, 1099-A, 1099-C, Start
  4. Scroll to the bottom
  5. Other reportable income, Start
  6. Other taxable income?
  7. Select YES
  8. Description  - whatever you want to say
  9. Amount, enter negative amount
  10. Continue
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vehicle buyback lemon law settlement?

Thank you for your response. It is very helpful. But it just made more questions.

How do I speak with someone in turbo tax?

Should I just have turbo professional do my taxes? 

What is the cost for preparing my taxes on an average, for these tricky situations. 

RobertB4444
Employee Tax Expert

vehicle buyback lemon law settlement?

You can contact TurboTax support here.

 

Having a TurboTax expert do your taxes is always an option!  And it does relieve some of the stress from these situations.

 

Here is where you can look at pricing and start your return with an expert.

 

@yo2025 

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