Lawsuit Settlement - Rental Property

Yes, the lawsuit settlement payment related to a tenant security deposit dispute for your rental property is generally tax deductible. Here's a clear and concise summary:

Deductibility:

• The payment is considered a business expense and can be deducted on your tax return
• You should report this payment as a rental expense on Schedule E (Form 1040), which is used for reporting income and expenses from rental real estate.

To enter your rental expense

1. Open or continue your return.
2. Navigate to the rentals section:
   • TurboTax Online/Mobile: Go to rentals. - be sure to be signed in or use the magnifying glass to search for rentals and select the Jump to link.
3. Answer Yes to the question Did you have any income from rentals or royalties?
4. On the next screen, Let's see if you're a real estate professional, select any options that apply to you.
5. On the screen What are you here to report?, select Rental property and Continue.
   • If you have more than one rental property to report, no problem—just start with one, and we’ll come back to the other one(s) later.
6. On the following screens, enter all the info we need about your rental property, including a description of the property, your rental income, any expenses and assets, and other less common situations about your rental.

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