Are legal damages taxable?

The taxability of legal damages is contingent on various factors such as the nature of the damages and the underlying claims. In the United States, damages received due to personal physical injury or physical sickness are generally not taxable. However, when it comes to punitive damages, they are taxable regardless of the origin of the claim. Damages for non-physical injuries such as employment discrimination, emotional distress (except when it arises from physical injury), or violation of antitrust laws are generally taxable. It’s imperative to consider the complexity of the tax code and possibly seek professional tax advice or legal counsel to understand the specifics regarding the tax implications of a legal settlement or award.