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Tax deduction for legal fee in defending my current job related to a threatening letter?

Personal Finance & Money Asked on November 30, 2020

I paid around 750 dollars last year to consult lawyers regarding a threatening letter from a former employer related to company confidential information where they asked me to sign additional confidentiality agreements and threatened a bit. There was no lawsuit. The lawyer gave me advice and that was pretty much the end of it.

Form 529 says this and it’s a legal expense that was incurred trying to defend against a former employer.

You can deduct legal expenses that are related to doing or keeping
your job, such as those you paid to defend yourself against criminal
charges arising out of your trade or business.

Based on that it seems it could be an ‘above the line’ subtraction from the gross income,
The form also says:

On the dotted line next to line 36, enter the amount of your
deduction and identify it as indicated.

Attorney fees and court costs for actions involving certain unlawful
dis-crimination claims, but only to the ex-tent of gross
income from such actions (see Pub. 525). Identify as “UDC.”

  • Can these fees be deducted in federal and states like CA, as above-the-line deductions?

  • If so, where in forms to deduct them? Should it go into adjustments to income line 36 of schedule 1 of 2018 1040?

One Answer

Yes, it seems that you can deduct legal expenses that are related to your employment. It should be entered on Line 21 of your return. There are more answers on ttlc.intuit.com/community/tax-credits-deductions/discussion/are-employment-related-legal-fees-still-deductible-in-california/00/174203

Answered by wilkvolk on November 30, 2020

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