Where do I enter an award from a taxable legal settlement?
Legal settlements that are taxable (including previously-deducted medical expenses related to physical injury or illness) are entered as miscellaneous (other) income.
You may or may not receive a 1099-MISC reporting the income. Regardless, this is how you should enter it:
- Open (continue) your return in TurboTax if you don't already have it open.
- In your program, search for 1099-MISC (upper- or lower-case, with or without the dash) and then click the "Jump to" link in the search results.
- Answer Yes to the question Did you get a 1099-MISC? (even if you didn't get one).
- Complete the top part and then enter the award amount or previously-deducted medical expenses in Box 3 Other Income.
- Fill out any other boxes from your paper 1099-MISC (if you have one), then click Continue.
- Select This was money from a lawsuit settlement on the Does one of these uncommon situations apply? screen and then answer the back wages question before clicking Continue.
Interest earned on settlements is taxable income and should be entered as a Form 1099-INT.