AlanT222
Expert Alumni

Get your taxes done using TurboTax

Yes, you must include your lost wages as income.  The hard part is being able to separate your settlement into different award amounts.  Most settlements are a lump sum amount that includes pain and suffering, medical expenses, and lost wages.

The only tax-free damages you can claim are the ones that compensate you for physical injury or physical sickness. 

Some elements of a settlement are taxable, including lost wages, punitive damages, and emotional distress damages.

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