Subject: Physical damages taxable?
From: Herb
Date: Sun, 09 Feb 2003
Michael,
Hello, my name is Herb and I have a lawsuit that is currently going through discovery. I have a really quick question on damages. Obviously, I am trying to pay as little in taxes as legally possible.
Are punitive damages taxable? Are physical damages taxable (even if I didn't go to the hospital)? If so, what can be done to best avoid this?
Herb
Answer
Date: 28 Feb 2003
Hello Herb,
Punitive damages are generally taxable. Damages for physical injuries generally aren't taxable. Consider getting help from an attorney who is familiar with these issues in drafting your settlement or lawsuit. This is a complex area of the tax law that requires more than a short answer.
Good luck!
Mike Gray
For answers to new questions, subscribe to our newsletter, Michael Gray, CPA's Tax & Business Insight by filling out the form below.
IRS Circular 230 Disclosure: As required by U.S. Treasury Regulations, you are hereby advised
that any written tax advice contained on this website was
not written or intended to be used (and cannot be used) by any
taxpayer for the purpose of avoiding penalties that may be
imposed under the U.S. Internal Revenue Code.