Christie sued her former employer for a back injury she suffered on the job in 2019. As a result of the injury, she was partiall
y disabled. In 2020, she received $240,000 for her loss of future income, $160,000 in punitive damages because of the employer's flagrant disregard for the employee's safety, and $15,000 for medical expenses. The medical expenses were deducted on her 2019 return, reducing her taxable income by $12,000. Christie's 2020 gross income from the above is:
According to IRS, under the tax benefit rule Amount of punitive damages and amount of recovered medical expenses is to be added to gross income, $240,000 for the loss of future income of will not be included.
