My question is if I win money from a settlement, will I have to report it? It would be considered a 998. It would stem from a settlement case for lemon car law where my car was defective & Volkswagen decided to settle. Will I have to report the money I win?
It would depend on what the settlement was for.
All punitive damages are taxable except in certain wrongful death actions. If you had an accident, compensatory damages are not taxable. Generally, if the settlement replaced something that was taxable income, then it is taxable. If it replaces something that is not taxable then it is not taxable.
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