24 Nov I got a class action settlement. Is it taxable?
Q. I was recently involved in a class action lawsuit related to a scam and I received a $60 cash settlement. Are the proceeds from this class action suit taxable by the state or federal government? I’ve spent more than $60 in time and energy to fix the mess the scam caused.
— Settling up
A. We’re sorry to hear that you fell victim to a scam.
The $60 might not feel like much, but it’s something.
Even if you are in the 37% federal marginal tax bracket, the tax implications of reporting the $60 would likely be $22 and possibly minimal state income taxes, said Michael Maye, a certified financial planner and certified public accountant with MJM Financial in Gillette.
“Since the award is not from a physical injury, a car accident injury settlement or medical-related, the $60 is likely taxable,” Maye said, noting you probably can’t offset your time and effort against the award. “Given the relatively small dollars involved it likely makes sense to report it as income.”
But you should still discuss with your tax preparer whether the amount is fully taxable based on the details of your situation, he said.
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This story was originally published on Nov. 24, 2022.
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