Lemon Law settlement TAXABLE ?

Forum|Forum|2 years ago
March 25, 2024
1 reply
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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.

Best answer by MarilynG

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,

MarilynGAnswer

Level 15

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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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.