If you won a judgment or received a settlement for a claim of unlawful discrimination, you may be able to deduct, as an adjustment to income on Form 1040, line 36, or Form 1040NR, line 35, rather than as a miscellaneous itemized deduction, attorney fees and court costs for actions settled or decided after October 22, 2004, involving a claim of unlawful discrimination, a claim against the U.S. Government, or a claim made under section 1862(b)(3)(A) of the Social Security Act. However, the amount you can deduct on Form 1040, line 36, or Form 1040NR, line 35, is limited to the amount of the judgment or settlement you are including in income for the tax year.
To claim this deduction, your situation must meet these requirements:
- They must be for an unlawful discrimination claim.
- Your claim must fall under provisions of federal, state or local laws listed in the Internal Revenue Code, or be a claim against the U.S. government, or fall under the Social Security Act.
- You must pay the attorney fees or court costs yourself, or they must be paid on your behalf.
- The judgment or settlement must have occurred after Oct. 22, 2004.
- Additionally, your deduction can’t exceed the amount of any judgment or settlement you received, which must be included as income in your federal income tax return for the tax year. To claim the deduction, include the amount in line 36 on Form 1040.
To claim the deduction, include the amount in line 36 on Form 1040.