The National Directory of Certified Public Accountants

Ask A CPA - Miscellaneous Income

Legal Settlement

Legal damages or compensation awarded on account of a physical injury or physical sickness such as in an auto accident, are non-taxable. Awards for emotional distress attributable to a physical injury or sickness are also non-taxable. Generally, punitive damages are taxable even if they relate to a physical injury or sickness. Speak to your local CPA about the taxability of the award you received.

If you need professional help with "Miscellaneous Income" or have other tax questions, we can help you find a local licensed CPA for a free, no-obligation consultation.