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lawsuit settlement - damages taxed?

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Texas


I am part of a lawsuit that has settled in bankruptcy courts. Plaintiffs are supposed to receive $________total over a few years (not sure how many years yet), two payments a year.

The damages are punitive and compensatory if that makes a difference, the case was in federal court, then kicked into state court, then defendants filed bankruptcy. It is for abuse suffered as a child.

Question is - what if any taxes are due on such a settlement? And are taxes taken out of lump sum of settlement or each settlement payment over the years?

My attorney said that every state was different on taxing of damages and settlements.

Thanks for any info.
 


abezon

Senior Member
Taxes, if any, will be taken out as the settlement is paid. Whether anything is taxable depends on how the settlement is worded. Talk to your lawyers.
 
Thank you -

I can't seem to locate anything online about the laws in TX on taxing of punitive and compensatory damages. I have two friends (plaintiffs) both in different states that both have different laws, one state doesn't have any taxes on either punitive or compensatory damages, the other taxed one (cant remember).

Anyone know how to find out what the TX laws are? Attorney says to talk to an accountant and a financial advisor when funds are distributed, but I would like to get an idea of what to expect before then if possible.

thanks!
 

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