I Want To Know If A Law Suit Settlement Is Taxable Or Not?

Q: I want to know if a law suit settlement is taxable or not? The settlement received was net of the attorney's fees and was for emotional duress on a sexual harassment case. The case was settled out of court. The harasser is in prison under a non related case for child porn and is under Megan's Law. The law suit cost me a promtion and probably any advancement ever within my company. I have very few out of pocket expenses and wanted to know if it is possable to deduct potential earnings lost due to the lawsuit black balling me. Of course this is assuming that the settlement is taxable and I will need to claim the deductions that I have. Any help or guidance would be appreciated.

A: Since August 1996, punitive damages and awards for non-physical injuries such as emotional distress have been subject to federal income tax. Compensatory damages -- the amount awarded to offset a plaintiff's actual economic losses -- are not taxable.

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