Taxes on Insurance Settlement

[LAYLAJEAN]

i am in texas. i received a settlement in 2000 on a class action lawsuit that involved my car. i bought a car from a dealership that was misrepresenting their vehicles and the finance company was also named in the suit. i paid for the car for 4 years and the reward was to re-pay us for the money we were out. recently i received a 1099 form from the attorney for the amount of the settlement. he said that any settlement money other than personal injury is taxable. i am not sure he is right, as he had stated several times that this was his first class action suit, so i wanted a second opinion. also, i feel i have already paid taxes on the funds involved.

Thank you,
Layla

 

[loku]

Damages

Basically, I agree with the attorney; however, personal injury includes injury to your property. So if the payment was for property damage rather than for breach of contract, you can exclude it. However, any punitive damages or damages for breach of contract would be taxable.