I paid over $15,000 in a legal settlement last year. Since that money will be subject to federal tax by the recipient, it seems reasonable that I would not be required to pay tax on these monies. I am not sure if I can claim this is a personal expense and, if so, how I would go about it.
2007-02-11 15:54:59 · 5 answers · asked by Anonymous in Business & Finance ➔ Taxes ➔ United States
You really need to talk to an accountant
2007-02-11 15:57:17 · answer #1 · answered by woobinator 2 · 1⤊ 0⤋
Personal expenses are never deductible, unless it is specifically identified in the Internal Revenue Code, such as medical expenses, mortgage interest and property taxes, state and local income taxes, charitable contributions, and casualty and theft losses. Only expenses that are attributable to the production of income is deductible, except for those previously specified. If the legal settlement is not related to the production of income, nor is it specified as a deduction, then it is not deductible.
2007-02-12 00:00:24 · answer #2 · answered by jseah114 6 · 3⤊ 0⤋
Legal fees associated with the production of income or the maintenance of the income. Legal settlements can be another story, what kind of settlement was it? If it's related to a divorce there are additional rules related to it. Contact me or another CPA for more info.
2007-02-12 00:20:50 · answer #3 · answered by Brad S 2 · 0⤊ 0⤋
If the settlement was for something that you could otherwise deduct then you can take the deduction. For example if it was unpaid home mortgage interest for your principal residence or a second home, take the deduction. If the settlement was for something that you could not otherwise deduct then no deduction is allowed.
2007-02-12 03:36:20 · answer #4 · answered by Bostonian In MO 7 · 0⤊ 1⤋
Nope...sux...but that's the IRS for you...they'll tax your tax returns..but by god if you pay out...it's in sticky waters.
2007-02-12 00:03:05 · answer #5 · answered by Anonymous · 0⤊ 0⤋