Question

Is money for emotional distress from a legal settlement after being on short term disability taxable? Individual was not able to work (disabled) but no physical injury

Forum|Forum|7 years ago
June 4, 2019
1 reply
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Individual was unable to work due to emotional state due to incident at work. Doctor and psychiatrist authorized short term disability. Legal settlement provided lump sum payment at end of short term disability for emotional distress. There was no physical injury, but since the individual was on SDI (physically unable to work), is the settlement taxable or not?

TurboTax Premier Online

V

Vanessa11_2

Employee

Yes, since there was not a physical injury it is taxable. Emotional distress legal settlements not related to a physical injury or physical sickness are included in your taxable income.

https://www.irs.gov/pub/irs-pdf/p4345.pdf

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