Seth Breidbart wrote:

- quote -

I oversimplified.

If the settlement is for something the taxpayer could have
deducted on his own tax return then the payment received is
not income but the deduction (including depreciation) is
lost (which may require an amended return).

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- quote -

What if it's a refund for overcharging?

Seth

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DR wrote:

- quote -

The settlement is taxable income except for the portion that
is used to compensate you for your actual loss. Your actual
loss is not necessarily the cost to repair or replace.
Rather, it is the difference between value immediately
before and after your damages. In that respect, you can
refer to the rules for calculating casualty loss See
http://www.irs.gov/taxtopics/tc507.html

And in particular, if part of the taxable settlement is for
legal fees, in this case you can deduct legal fees to
recover taxable income only on schedule A subject to the 2%
AGI reduction.

Milt Baker CPA

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DR <duklvr[at]tekstar.com> wrote:

- quote -

Maybe. What is it for?

Seth

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DR wrote:

- quote -

Unless the payment is for physical illness or injury then
yes, it is taxable at the federal level.

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"DR" <duklvr[at]tekstar.com> wrote:

- quote -

It depends on what it's for. If it's to pay you back for a
personal injury or for an actual out-of-pocket loss rather
than a missed opportunity, it's probably not taxable. But
it's actually fairly complicated, and the complaint and
settlement agreement or judgment would have to be reviewed
to determine how much, if any, is taxable.

Stu

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When receiving an amount of money from a class action
lawsuit (10-15K) I am wondering if this is federal or state
(MN) taxable income. Thanks

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