Los Angeles, CA asked in Tax Law for California

Q: Can my settlement be taxes

Disability discrimination. . Paid and suffering . I never worked for the company . So no wages attached.

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1 Lawyer Answer
David S. Greenberg
David S. Greenberg
PREMIUM
Answered
  • Tax Law Lawyer
  • San Diego, CA
  • Licensed in California

A: Neither the federal government (the IRS), nor your state, can tax you on the settlement or verdict proceeds in most personal injury claims. Federal tax law, for one, excludes damages received as a result of personal physical injuries or physical sickness from a taxpayer's gross income.

Determine if any of the lawsuit, award or settlement proceeds constituted punitive damages. All punitive damages are taxable whether received in relation to a physical or non-physical injury or sickness. ... Damages for emotional distress in these cases are only excluded to the extent of paid medical expenses.

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