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Does the IRS treat a settlement under the Washington State Consumer Protection Act as taxable income?

Redmond, WA |

Does the form of the settlement have any impact on the tax status?

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Attorney answers 2


The IRS treats almost everything as income, with a notable exception for "personal injuries or sickness." See I.R.C. section 104 for exclusions from gross income.

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Any portion you received that reflects an amount that "makes you whole" again wouldn't be taxable, but any other part, such as the punitive component, would be taxable.