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For your settlement, the amount that you are refunded for your club deposits - fees that you paid and are getting reimbursed for, are tax free
You are only taxed on the punitive damages, or interest that you receive
So, if your settlement is your club deposit plus $5,000 you are only taxed on that $5,000
You can read about the taxation of settlements, HERE
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Thank you.... In the attachment you sent it lists the following to include as ordinary income: Attorney fees and costs (including contingent fees) where the underlying recovery is included in gross income. Is there an offsetting deduction for these expenses?