Crushing Tax Change For Injured Consumers

tax change damages

    Under the new tax law,  most damage awards a consumer recovers stand to go, in large part, to the IRS. So even if you are successful in vindicating your legal rights, the expenses of getting the award aren't deductible from the gross award. The taxing authorities end up getting a large hunk of the total recovery. Welcome to tax "reform". Consumers get shafted It isn't that way for every plaintiff, and it wasn't that way before tax "reform". If you operate a business and hire an attorney to assist you with business issues, your legal fees will typically be fully deductible under IRC Section 162 as ordinary and necessary business expenses. Recoveries for personal physical injuries or physical sickness are non-taxable and the change in the law won't affect you. But the vast bulk of all other  legal recoveries ARE taxable under IRS Section 104 .  However, you used to be able to deduct the costs to obtain the award under the miscellaneous expense … [Continue reading...]