To determine if settlement amounts you receive by compromise or judgment must be included in your income, you must consider the item that the settlement replaces. You may be able to deduct expenses from that income.
To enter attorney fees in your TaxAct® return (Online or Desktop):
Additional information from IRS Publication 525 Taxable and Nontaxable Income, page 30:
Deduction for costs involved in unlawful discrimination suits. You may be able to deduct attorney fees and court costs paid to recover a judgment or settlement for a claim of unlawful discrimination under various provisions of federal, state, and local law listed in Internal Revenue Code section 62(e), a claim against the United States government, or a claim under section 1862(b)(3)(A) of the Social Security Act. You can claim this deduction as an adjustment to income on Form 1040, line 36. The following rules apply.