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I will receive a settlement from a company in 2016 related…

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I will receive a settlement...
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: 2 years ago.Category: Tax
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Answered in 21 minutes by:
3/4/2016
Tax Professional: emc011075, Tax adviser replied 2 years ago
emc011075
emc011075, Tax adviser
Category: Tax
Satisfied Customers: 3,709
Experience: IRS licensed Enrolled Agent and tax instructor
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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.

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Tax Professional: emc011075, Tax adviser replied 2 years ago

I see you read my respond. Do you have any questions? Is there anything else I can help you with today?

And if this answered your question, please take a moment to rate my response so that I may receive credit for assisting you today. You find the rating bar on the top of the page – 5 stars. However, if you need clarification, or want to discuss this issue further, let me know. Thank you.

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