If I win a civil lawsuit do I have pay taxes on it?

Question

If someone trashes my car do I have to pay taxes on the income of the court case?
Now lets say I was in the car while it was hit and I miss work due to being injured and I win a sum of money for my lost wages, do I have to pay taxes on the amount awarded due to lost wages.
Now lets say my employeer breaches a contract and doesn't pay me my salery and I take him to court and win then do I have to pay income taxes on that money awarded to me, or does he give me my money like he would give a regualar paycheck?
Are their loop holes in the tax system? I think it would be awesome if thier were.

This also goes with settlements outside of court. So if I settle on a case do I count it as income?

Thanks that is what I thought and it took 2 minutes for me to look up. But it seems hard to believe that if you are injured and you sue for lost wages that you have to pay social security out of that. I would have no idea how to do that.

I also was thinking that would make the tax code really complicated. Now I just laugh at that statement.

Answer 1

It depends.

If you sue someone for something that would have been taxable income if they'd paid you without a suit, then it's taxable income.

If you sue someone for finacial damages then it's not taxable because you don't come out ahead on the deal - the person does $1,000 of damage to your car, pays you the $1,000, and you fix your car. You're no better off than before, so no taxable income.

If you sue for unpaid wages, and win, then your employer should deduct taxes just as if he paid you normally.

Richard