I recently won in mediation a lawsuit due to an automobile accident. The proceeds are not from physical damages but from emotional distress. Is the award taxable income?
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Damages for mental distress and emotional anguish are taxable unless received for a physical injury
It depends on whether the mental distress was the result of a physical bodily injury to yourself (non-taxable) or the result of damage to your property or a stressful situation or bodily injury to someone else (taxable).
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