Do you have to pay taxes on money awarded in a wrongful death lawsuit?
Answers:
Only as it's recovered from the debtor, and at ordinary income rate.
Basically, yes. There are some exceptions, but all income is generally taxed. Check with a tax attorney for details.
It's possible no income tax would be owed but there might be some state taxes due, depending where you are.
Any interest on the money would be taxable.
Start with the sight below. Google or go to ask.com and inquire there.
depending on your state, economic damages (lost income) would not be taxable. punitive damages (punishment) would be. as I said laws vary by state.
When you do your income taxes, you are supposed to report all money received no matter what source.
I had a friend who got audited. He had won trophies in a chess tournament and not reported their value in income taxes. He argued that the amount of money he spent in getting good at chess was far greater than this pay back, but the tax auditor says that not matter.
Suppose you bet at race track. Suppose you win occasionally, lose lots. It does not matter if you lose $ xx,xxx.xx ... you must report all your winnings, pay taxes on all winnings, cannot deduct your losses.
Only exception to this is if you have registered a business. Your business is that you will be betting on the races. That way you can deduct the money you lose.
A private corporation does not need to be for profit. It can be for loss, to get the tax benefits. But you have to go to the trouble of registering this in advance.
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