2007-07-25 14:02:42 · 5 answers · asked by ga_fan72 1 in Business & Finance ➔ Taxes ➔ United States
That depends. A settlement for physical injury or illness is not taxable. If any portion of that settlement is earmarked for lost wages, interest, or punitive damages that portion is fully taxable as ordinary income.
Additionally, a settlement that only makes you whole again is not taxable. For example, you sue your homeowners insurance company over a denied claim for a loss and win. The award only covers your actual losses. It is not taxable. Anything over and above your losses would be taxable as ordinary income.
2007-07-25 21:44:12 · answer #1 · answered by Bostonian In MO 7 · 1⤊ 0⤋
Generally speaking, if it is business-related, yes. Other than punitive damages, amounts for physical injuries or sickness are not taxed. It all depends on the type of lawsuit, and what you can deduct as legal fees also depends on the lawsuit.
2007-07-26 19:23:54 · answer #2 · answered by Gerald 2 · 0⤊ 1⤋
By a "Court Issue" do you mean a judgement from a lawsuit? If so, your substantive damages are generally not taxable, but punative damages are. Exceptions exist, so be more more specific if you want a specific answer.
2007-07-25 23:01:11 · answer #3 · answered by BruceN 7 · 1⤊ 1⤋
Read over page 29 of this adobe document from the IRS to determine if you need to include your reward as income.
http://www.irs.gov/pub/irs-pdf/p525.pdf
2007-07-29 01:41:39 · answer #4 · answered by Let me steer you 7 · 0⤊ 0⤋
subject to same taxes as your other income and you report on your annual return.
2007-07-25 21:54:17 · answer #5 · answered by kris 2 · 0⤊ 4⤋