It depends upon the nature of the award. The Internal Revenue Service provides that compensatory damages for personal physical injuries are not taxable whether received in a lump sum or in installment payments over a period of time. Damages for emotional distress are not taxable if they are received for an underlying physical injury or sickness. However, if the emotional distress damages are not due to a physical sickness or illness then those damages are taxable.
Other forms of damages that are taxable include: interest on any award, compensation for lost wages and lost profits, and punitive damages in most cases even if the award relates to a physical sickness. For further information on this admittedly difficult subject, see Internal Revenue Service, Publication No. 525 Taxable and Nontax-able Income, at http://www.irs.gov/pub/irs-pdf/p525.pdf.
- What is the difference between a lump sum settlement and a structured settlement?
- Can states cap punitive damage awards?
- Are there limits to punitive damage awards?
- What factors does a court consider in determining the amount of punitive damages?
- What is the role of punitive damages in bifurcated tort cases?
- What are some examples of frivolous lawsuits?
- What was the McDonald’s hot coffee case?
- Why are punitive damage awards considered controversial?
- What types of damages are most common in tort cases?
- What is the duty to mitigate damages?
- Which states still do have contributory negligence?
- Why is comparative fault considered fairer than contributory negligence?
- Who determines the percentages of fault of the parties?
- What are the different forms of comparative negligence?
- What happens if both parties (plaintiff and defendant) are negligent?
- If you fall on a slippery floor in a store, can you sue for negligence?
- Where does the term good Samaritan come from?
- Can a Good Samaritan be held liable if he or she acts negligently even though they are trying to help?
- What if some unexpected event causes damage to a plaintiff after a defendant’s negligent act?
- Can an employer be held negligent if it retains or hires an employee who is dangerous to the public?
