MonikaK1
Expert Alumni

Deductions & credits

If the terms of the settlement you received were limited to reimbursement of medical expenses and related attorney fees, then you wouldn't have any taxable income to report and nothing to deduct.

 

If you had taxable damages from a civil rights case, then you could deduct the portion of the settlement that represented attorney fees.

 

Whether a lawsuit settlement payout is taxable depends on what the settlement represents. If this is a refund of previously paid insurance premiums or medical expenses, then it is nontaxable unless the amount was previously deducted on your tax return.

 

See IRS Publication 4345 and this IRS article for more information about legal settlements.

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