legal expenses

[VPBC1]

Are legal expenses incurred in a "wrongful" termination lawsuit deductible under the "production of income" category previously allowed?

[sjrcpa]

Yes, but at the federal level they are misc itemized deductions subject to 2% of AGI which aren't allowable in 2022. A few states don't conform.

[BobKamman · Accepted solution]

Depends on the reason for the termination.

From IRS Pub 525:

Deduction for costs involved in unlawful discrimination suits. You may be able to deduct attorney fees and court costs paid to recover a judgment or settlement for a claim of unlawful discrimination under various provisions of federal, state, and local law listed in section 62(e), a claim against the U.S. Government, or a claim under section 1862(b)(3)(A) of the Social Security Act. You can claim this deduction as an adjustment to income on Schedule 1 (Form 1040), line 24h. The following rules apply.

• The attorney fees and court costs may be paid by you or on your behalf in connection with the claim for unlawful discrimination, the claim against the U.S. Government, or the claim under section 1862(b)(3)(A) of the Social Security Act.
• The deduction you're claiming can't be more than the amount of the judgment or settlement you're including in income for the tax year.
• The judgment or settlement to which your attorney fees and court costs apply must occur after October 22, 2004.

[VPBC1]

thank you, I read your solution as any other reason other than discrimination is not allowable and would fall out anyway because of miscellaneous itemized being non allowable in 2022.  Suit was for whistleblower reasons.