Damages for Emotional Distress are Taxable

The tax court confirms that damages received for emotional distress are taxable. A woman claimed she was retaliated against by her former employer because she requested medical accommodations for an earlier workplace injury. She filed a discrimination lawsuit and a judge awarded her damages for emotional distress. She claimed her emotional trauma was related to a previous physical injury so the awarded amount was tax-free, but the courts ruled it was indeed taxable.

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