TaxTips

Continuously looking for ideas to save your tax dollars


Keeping our Client's abreast of new tax laws and providing them with possible ideas on ways to reduce their tax burden is one of our goals.   We offer this through this continual update of new tax laws and providing some TAX TIPS which may offer savings ideas.  We present these ideas; however, please consider all facts in your case, and talk with your tax representative,  before implementing any of these these ideas.

       Deduction for Wrongful Discrimination Claim Costs

In general, damages from legal settlements, for other than for personal injury or sickness, are included in income.  However, the costs of pursuing these type of claims were deductible as a miscellaneous itemized deductions, subject to the 2% of Adjusted Gross Income(AGI), meaning that you had to itemize deductions and only those expenses over the 2% of AGI would be deductible.  

Under the American Jobs Creation Act (AJCA), the legal fees and court costs incurred in connection with an unlawful discrimination claim that are paid after the date of the law's enactment are deductible as an "above-the-line", before AGI, deduction.  This means that these costs are deductible even if the taxpayer does not itemize deductions.

 

 Copyright   1987 - 2010 A. Harold Davis, CPA