Do I have to pay tax on damages received for emotional distress?
Court awards or settlements are generally taxable
and you must report them on your tax return unless they are compensation for a
personal injury.
Damages received after August 20, 1996 are tax free
and do not need to be reported on your tax return only if they are
paid for physical injury or sickness.
Emotional distress is not considered a physical injury or sickness; therefore, damages
for emotional distress are includable in taxable income and you must report
them on your tax return. However, damages up to the amount
paid for medical expenses attributable to emotional distress are tax free
and you need not report them on your tax return.
Related information about damages received for emotional distress
IRS
publications about damages received for emotional distress: For further information about damages received for emotional
distress see Chapter 13 of IRS Publication
17,Your Federal Income Tax.
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rules and regulations and your particular tax or IRS situation you should
consult with a Certified Public Accountant, Enrolled Agent, Attorney, or
other tax advisor.
Your Federal Income Tax.
