Question

An individual who prevails in a personal injury claim for something other than a physical injury or sickness must include the amount of the award or a settlement in gross income. In contrast, an award or a settlement for a physical personal injury or sickness can be excluded (except for punitive damages) from gross income. Should damages awarded for a physical personal injury or sickness be treated more favorably than damages awarded for emotional distress or other nonphysical personal injuries such as age and sex discrimination?

Answer 1

There is no standard response to this question since it is a personal response answer, In my view, damages awarded in physical personal injury shoud be dealt with separately and given a special treatment because the injuries that take place are tangible or can be felt and seen and they are easily treated. A person will have to get admitted to the hospital then he gets his mediclaim. But the damage in case of physical personal injury may lead to an outflow in terms of hospital bills etc. Emotional and non physical injury may not lead to a direct outflow and hence from a taxation perspective, the physical personal injury should have a special preference.