2007-03-26 08:44:38 · 3 answers · asked by aapril5 1 in Business & Finance ➔ Taxes ➔ United States
That depends. If the settlement was for physical injury or illness, it is not taxable. If any portion of the settlement was for lost wages, interest, or punitive damages, that portion is fully taxable.
If the suit was for anything other than physical injury then it's fully taxable in most cases. An exception to that would be a successful suit for insurance proceeds for a covered loss under the policy as long as the proceeds were used to make you whole again. Any portion for interest or punitive damages or any excess above what is required to restore you to your pre-claim position would be fully taxable as noted above.
2007-03-26 08:50:05 · answer #1 · answered by Bostonian In MO 7 · 3⤊ 2⤋
The short answer is it depends on what the payout is for. If you would have been taxed for what the lawsuit covers, the payout is taxable. If you would not have been taxed for it, the payout is not taxable. It is also possible that part of the payout is taxable and part is not. If your attorney can't answer this question, you should take the paperwork to a CPA or a Tax attorney.
2007-03-26 11:46:57 · answer #2 · answered by STEVEN F 7 · 1⤊ 1⤋
No, that is non taxable income
2007-03-26 08:48:10 · answer #3 · answered by Outside the box 6 · 0⤊ 4⤋