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emc011075
emc011075, Tax adviser
Category: Tax
Satisfied Customers: 2310
Experience:  IRS licensed Enrolled Agent and tax instructor
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I will receive a settlement from a company in 2016 related

Customer Question

I will receive a settlement from a company in 2016 related to a consumer complaint. This is not a personal injury settlement or settlement related to a product liability claim. I did not sustain any bodily injury, but I suffered only out-of pocket expenses which the settlement is intended to compensate me for.
1. Is this type of settlement considered taxable income federally?
2. Is this type of settlement considered taxable income in the Sate of Hawaii, where I reside?
Submitted: 9 months ago.
Category: Tax
Expert:  emc011075 replied 9 months ago.

Hi. My name is ***** ***** I will be happy to help you.

Yes, settlements are considered taxable income for federal and state purposes. You may be able to deduct attorney/lawyer fees (if included in settlement proceeds) with some limitations, but such deduction is usually not available on state level. The only exception is settlement for physical injury.

Expert:  emc011075 replied 9 months ago.

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