Settlements: Tax Outcomes Every Litigator Needs To Know

Damages, settlement payments and indemnity payments frequently arise as a result of disputes in the commercial context. The income tax treatment of such payments can significantly impact their financial consequences for both the payor and recipient.

Depending on their characterization, such payments may be fully taxable, partially taxable, and in certain cases, non-taxable. This article highlights key tax implications and planning strategies relevant to the taxation of settlement and indemnity payments, and discusses the importance of considering the tax implications of such payments to optimize financial outcomes and minimize tax liability when the circumstances allow for it.

Not All Damages Or Settlement Payments Are Equal (After Tax)