Question

I paid attorney fees to win my appeal and received lump sum social security disability pay. I need to pay income tax on it. Where do I deduct attorney fee?

Forum|Forum|4 years ago
April 12, 2022
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TurboTax Free Edition Online

For federal income tax purposes, legal fees are no longer deductible. The Tax Cut and Jobs Act of 2018, disallowed miscellaneous itemized deductions for the period 2018-2025. That includes personal legal fees, including legal fees incurred in the production of taxable income. i.e. Social Security.

However, you may include them and TurboTax will transfer the amount as a deduction on your state income tax return, if your state allows it.

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Type legal expenses, deduction in the search or find box, click search.
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In general, only legal fees that are related to your business, including rental properties, can be deductions. This is true even if you didn't win the legal case in which the legal fees were incurred.

Can I Deduct Legal Fees on My Taxes

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G

GDSEB

This publication seems to indicate some income from physical sickness is not taxable. https://www.irs.gov/government-entities/tax-implications-of-settlements-and-judgments

Also in the Federal Code

https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title26-section104&num=0&edition=prelim

How about legal fees paid to get ERISA benefit via employer disability insurance policy? While Turbotax says all attorney fee expenses are not deductible, the IRS info above and these articles indicate to the contrary.

Any idea while these authors are incorrect? I've found two different IRS publications that conflict with themselves in many cases.

Also this article indicates possibility of attorney fee deduction, counter to your indications

https://www.forbes.com/sites/robertwood/2022/02/17/how-to-write-off-legal-fees-on-your-taxes/?sh=6aa37d65217f

https://www.whiteman-law.com/tax-deduction-of-attorney-fees-in-employee-bene[product key removed]ns-unchanged/

https://www.americanbar.org/groups/business_law/publications/blt/2022/04/write-off-legal-fees/

Are you 100.00% sure? Sometimes IRS pubs don't match US Govt. Registrar tax law.

D

DianeW777

Yes. The law has changed. Legal fees used to be a deduction under Miscellaneous Expenses when using itemized deductions and it was limited to the amount that exceeded 2% of adjusted gross income (AGI). Since the Tax Cuts and Jobs Act (TCJA) enactment this has been eliminated for tax years 2018-2025. It remains to be seen if it will automatically revert back in 2026. This may depend on what the legal fees are actually for. As stated by our tax expert @HelenC12.

This was not a discrimination lawsuit and therefore the legal fees are not deductible.

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