Do I have to pay tax on damages received for emotional distress?
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| 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.
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| Related information about damages received for emotional distress |
Tax Directory Topics:
Legal Fees
Legal Settlements
Income Related Questions and Answers |
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. Please read this IMPORTANT
Editor's Note regarding navigating IRS publications with Adobe
Acrobat
Reader.
IRS publications can also be ordered by calling 1-800-829-3676. |
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