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patriciap819
New Member

I received a settlement in a lawsuit for emotional distress. Do I enter it on my taxes?

 
1 Reply
RichardG
New Member

I received a settlement in a lawsuit for emotional distress. Do I enter it on my taxes?

That depends on the nature of your claim.  According to the IRS, the settlement is not taxable if:

  •  The proceeds you receive for emotional distress or mental anguish originating from a personal physical injury or physical sickness are treated the same as proceeds received for Personal physical injuries or physical sickness above. BUT 
  • If the proceeds you receive for emotional distress or mental anguish do not originate from a personal physical injury or physical sickness, you must include them in your income. However, the amount you must include is reduced by: (1) amounts paid for medical expenses attributable to emotional distress or mental anguish not previously deducted and (2) previously deducted medical expenses for such distress and anguish that did not provide a tax benefit. Attach to your return a statement showing the entire settlement amount less related medical costs not previously deducted and medical costs deducted for which there was no tax benefit.
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