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Court Awards, Damages, and Legal Settlements

These amounts can be taxable or nontaxable, depending on the nature of the injury that they are designed to compensate you for.

Compensatory damages received for personal physical injury or physical sickness are not taxable. Since emotional distress is not “physical,” the amounts received for emotional distress are taxable. However, reimbursement for the medical expenses to treat the distress are tax free.

The following types of damages would be taxable as ordinary income:


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