Lemon Law settlement TAXABLE ?

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I won a lemon law settlement of 45,000 ( $28,500 actual damage + $16,500 additional damage ( $30,000 x 55%) . It was on the check, $45,000. The attorney firm got $13,500 ($30,000 x 45%). I was able to KEEP the car. I originally bought the car for 28,500. What do I pay tax on?

My case was I KEPT the car.

Do I have to pay tax on $45,000 or on $16,500 ?

Please help me.

MarilynGAnswer

Alumni - Intuit

Generally, any proceeds above the price you paid for the car are considered Capital Gains.

Here's more info on Taxability of Settlements and How Capital Gains are Taxed,

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MarilynGAnswer

Alumni - Intuit

Generally, any proceeds above the price you paid for the car are considered Capital Gains.

Here's more info on Taxability of Settlements and How Capital Gains are Taxed,

**Say "Thanks" by clicking the thumb icon in a post. **Mark the post that answers your question by clicking on "Mark as Best Answer"

tamtrinhAuthor

Level 2

Hi Marilyn,

My case was I kept the car. The proceed was $45,000 ( the amount I got on my check), the price I paid was $28,500. Therefore the capital gain will be $16,500. Is it correct?

Thank you.