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My question is this: I was let go on my job because they…

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my question is this: I...
my question is this: I was let go on my job because they said the employment category was eliminated. I filed a lawsuit for my job back based on sexual harassment. Can i deduct my legal fees ? My case went to trial and I lost. They are making pay the legal fees of the employer.
Can I deduct them ?
Submitted: 2 years ago.Category: Tax
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2/2/2016
Tax Professional: Robin D., Senior Tax Advisor 4 replied 2 years ago
Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 17,813
Experience: 15years with H & R Block. Divisional leader, Instructor
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Hello

You are allowed to deduct legal fees that are paid in the course of obtaining taxable income.

If you sued and received a settlement, the legal fees would be allowed as a deduction. The fees paid for the other party in the suit are not allowed as deduction unless you have taxable income form this suit that is shown on your return.

Unless you have taxable income that resulted from the suit, you cannot deduct the fees.

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Tax Professional: Robin D., Senior Tax Advisor 4 replied 2 years ago

Please post below

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Customer reply replied 2 years ago
to be clear on the first part of the question, if I sue and lose: ie don't obtain taxable income - I am not allowed to take the deduction- even though my legal fees were for trying to recover my job ?
Tax Professional: Robin D., Senior Tax Advisor 4 replied 2 years ago

In short yes, but as with all tax situations it is complicated.

You could not claim legal fees in a lawsuit that was for sexual harassment unless you received taxable settlement from the suit.

You can deduct legal fees related to doing or keeping your job.

Generally, one must look to the underlying lawsuit to determine which Code section applies. The IRS would look to the actual claims in the case if you were audited.

In order for IRC § 62(a)(20) to apply, attorney fees and court costs must have been paid with respect to a judgment or settlement occurring. Additionally, the suit must involve Unlawful discrimination.

The fees are still required to have a settlement or income resulting form the case that is taxable.

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Tax Professional: Robin D., Senior Tax Advisor 4 replied 2 years ago

After you view my response, please post below if you need more information or if you need no further clarification a positive rating is appreciated.
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