Had a work comp injury claim turn into a Bad Faith lawsuit because employer continued to deny medical treatment. Work comp claim was not finalized till Bad Faith mediation settlement was completed 1 month before scheduled trial. I rcvd a settlement but due to contingency only rcvd 60%. Can I deduct the 40% that was taken from settlement?
No.
The general rule for attorney's fees is that they are only deductible if they are related to producing/collecting taxable income
The case where people have tried to deduct worker's compensation attorney's fees has been well litigated.
Even though it seems like it should be deductible because it relates to work, that is not the case. Because Worker's Comp settlements are not taxable then the attorney's fees related to those types of cases cannot be related to taxable income so you can't deduct your contingency fee.
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