Tax Question- Reporting punitive damages?
I have received a personal injury settlement, I know the punitive damages are taxable. The lawyer has told me how much of the settlement is punitive damages, but I have not received any form or letter stating the punitive damage amount. So to report the damages on my taxes do I enter in the amount that he told me under misc income or do I leave it blank and not report it?
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Line 21 of Form 1040, Other Income.
BTW, your attorney made a major error accepting a settlement with punitive damages. Had it been for pain and suffering, it would not have been taxable.
The settlement paperwork will spell out what each portion of the damage award is for. Anything for punitive damages, lost income or accrued interest is taxable. The rest is not.