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Is Restitution Paid Deductible

csanchez
Level 3

Is restitution paid to US District Court deductible?

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8 Replies 8
BobKamman
Level 15

The IRS in 2015 issued a  private letter ruling which held that a principal of a business could deduct the amount of money paid as restitution in a business crime plea deal. This ruling was significant because while Sec. 162(f) states that no fines or penalties paid for violation of a law are tax deductible, Sec. 162(b)(2) provides that compensatory damages paid to any entity do not constitute a fine or penalty. Treas. Reg. Sec. 1.162-21(b)(2) provides that a fine or penalty includes an amount paid in settlement of a taxpayer’s actual or potential liability in a civil or criminal matter.  

 

https://scarincihollenbeck.com/law-firm-insights/tax/taxes/business-tax/restitution-payments-are-tax... 

csanchez
Level 3

Yes I read this. My client is not a business so the answer would be not deductible?

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sjrcpa
Level 15

Correct.


ex-AllStar
qbteachmt
Level 15

It matters who paid and why, though. If that cash outflow is a type of payment or "makes whole" something that is a deduction per tax regulations, it likely is deductible when the taxpayer was forced to pay it.

Examples: Restitution to someone because you damaged their personal property is not tax deductible.

Restitution for medical costs because you harmed a person would be tax deductible to the extent the medical expense paid by you on behalf of another is or is not deductible due to limits, already.

There is no one answer without specific details.

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Cyh1980
Level 1

Are my restitution payments paid for theft of stolen property tax deductible?

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qbteachmt
Level 15

@Cyh1980 

You seem to be lost on the internet.

You’ve come to a Peer User community for Intuit Income Tax Preparation products supporting tax preparation professionals using ProSeries, Proconnect and Lacerte Tax Preparation programs, and you may be looking for support as an individual taxpayer. Please visit the TurboTax Help site for support.

Your sign in user info here is the same one you can use over at the TurboTax forum.

Thanks.

 

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sjrcpa
Level 15

You stole stolen property?


ex-AllStar
IRonMaN
Level 15

"You stole stolen property?"

Would a person have to pay restitution to two people in that case?


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