Tax,
Civil Litigation
Jun. 22, 2018
Why emotional distress damages are taxable but sickness is not
The tax treatment of litigation damages is varied and complex. But at least the rule for compensatory damages for personal physical injuries is supposed to be easy.
Robert W. Wood
Managing Partner
Wood LLP
333 Sacramento St
San Francisco , California 94111-3601
Phone: (415) 834-0113
Fax: (415) 789-4540
Email: wood@WoodLLP.com
Univ of Chicago Law School
Wood is a tax lawyer at Wood LLP, and often advises lawyers and litigants about tax issues.
The tax treatment of litigation damages is varied and complex. But at least the rule for compensatory damages for personal physical injuries is supposed to be easy. They are tax free under Section 104 of the tax code. Yet exactly what is "physical" for this rule isn't so clear. Some of it seems to be semantics.
If you make claims for emotional distress, your damages are taxable. But if you claim the defendant caused you to become
For only $95 a month (the price of 2 article purchases)
Receive unlimited article access and full access to our archives,
Daily Appellate Report, award winning columns, and our
Verdicts and Settlements.
Or
$795 for an entire year!
Or access this article for $45
(Purchase provides 7-day access to this article. Printing, posting or downloading is not allowed.)
Already a subscriber?
Sign In