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
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.
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