- Created: Thursday, 31 July 2014 15:12
by Natalie Lorenz, Associate
Question: Do I have to pay taxes on damages I received in a court case? Answer: It depends on the reason you received the damages.
Damages are not taxable if they are awarded on account of a personal physical injury. 26 U.S.C. 104(a)(2). Under this test, there are two requirements: first, there must be a physical injury, and second, damages must have been awarded “on account of” that physical injury.