Do you have yo pay taxes on a lawsuit?

Answer 1

Yes, once your attorney has taken his/her share of the settlement.

Answer 2

Everyone who said a flat "yes" or "no" please go to the back of the class and put your dunce caps on.

Awards and settlements for physical injury or illness are not taxable. However if part of the award was earmarked for lost wages, interest, or punitive damages that part is fully taxable as ordinary income.

Awards and settlements that only make you whole again are not taxable. For example if you sue following a non-injury accident and recover money to have your car repaired, the amounts used to repair your car are not taxable. If you are awarded more than the cost of repairs, the excess is fully taxable as ordinary income.

Awards and settlements for such things as discrimination, slander, libel, etc. are fully taxable as ordinary income.

Attorney's fees can get messy so any competent attorney will structure the settlement so that he or she is paid directly by the other party. This way you don't have to deal with that mess.

Answer 3

Depends on the reward. If you are awarded your attorney fees and you have listed those fees as an expense on a prior years tax return - then you recapture it as income when you receive it. I'm not sure about punitive damage - think that is taxed, but not actual damage award.
Check this IRS site - you may have to do some more searching, but it gets you to the starting point.
http://www.irs.gov/publications/p525/ar02.html#d0e8039

Answer 4

In most cases they are taxable, unless the award is for a physical injury, then there are some different rules.

Answer 5

Not in New York state.

Answer 6

If you win.It won't be much,the lawyer will get most of the money any way.

Answer 7

no, but the lawyer will get one-third

Answer 8

no

Answer 9

no