Is money received as part of a warranty settlement considered taxable income?

[Vanessa A]

It depends.  A warranty settlement that made you whole again would not result in a gain.  For instance, you had an Expedition with a recall for the blower motor that caught on fire. You had to replace your blower motor before Ford decided it was a defect and did the recall. They then paid you the amount you were out for this repair. This would not result in a gain and would not be taxable. 

However, if you did have a gain on this warranty settlement, say, you didn't ever do any repairs and your vehicle was fine, Ford replaced the motor for you but then you received a check for $500.  This would be a gain as you were not out anything and you received additional income.  In this situation, the check would be taxable. 

[dwhit123]

Thank you, this is a perfect response.