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In that case, you'd report the medical expenses related to the incident as miscellaneous (other) income. Punitive damages are taxable except in certain wrongful death cases, as are awards for employment discrimination and injury to reputation (libel, slander, defamation, etc.).
Another indicator that your class action settlement money is taxable is whether or not you receive a tax form at the end of the year. You should receive a 1099 at the end of the tax year.If you receive a 1099 MISC, then that means the entire amount, some of which can be for nontaxable damages, has been lumped together.ccording to the IRS, âAn award is generally taxable, unless it is specifically excluded from income by law or constitutes a return of capital.â Whether or not your class action lawsuit money is taxable depends upon the nature of the lawsuit and of several other factors.