In
general, any settlement you received for personal or physical
injury or sickness is NOT taxable.
Most other [legal] settlements, such as
for back pay and punitive damages, are taxable.
In the case of property (like your car) ,
if the settlement merely restores your original value, it’s not taxable, but if
it enriches you beyond where you were before, it is taxable.
If you received a
1099
miscl for this lawsuit settlement:
This is how
you should enter it:
- Open (continue) your return in TurboTax if you don't
already have it open.
- In your
program, search for 1099-MISC (upper-
or lower-case, with or without the dash) and then click the "Jump
to" link in the search results.
- Answer Yes to the question Did you
get a 1099-MISC? (even if you didn't get one).
- Complete
the top part and then enter the award amount or previously-deducted
medical expenses in Box 3 Other Income.
- Fill out
any other boxes from your paper 1099-MISC (if you have one), then
click Continue.
- Select This was money from a lawsuit settlement on
the Does one of these uncommon
situations apply? screen and then answer the back wages question
before clicking Continue.
