Tax rate question

[LuvN~Travel]

I'll probably find this answer out tomorrow from our attorney, but right off hand does anyone know the federal tax rate for punitive damages from a lawsuit?
We get our monies (finally!) tomorrow from a lawsuit we had against our former mortage companies. Woot!
Just so I can daydream better today, I want to know about how much we'll be getting back and how much the IRS gets from the punitive part.
And trying to find out this through the internet search is a pain! I don't know why they won't just publish a simple tax rate chart out there......
Kim

 

[LoraJ]

Don't take my word for it, but I don't think you get taxed on it.

I have a personal injury case that has been going on for years. I asked my accountant at one point how much I would get taxed. I was told nothing for whatever I collect for pain and suffering, The only thing I would get taxed on would be whatever I collect for lost wages.

 

[marlasmom]

I THINK pain and suffering is one thing - misconduct by a mortgage company very different. My feeling is that it would be taxed as ordinary income - so figure out your total income - including the award, deduct your deductions and exemptions and look on the tax tables to see what your tax is. Deduct from that figure the amount you pay in withholding. Check on your last paystub for amount already deducted, add the amount deducted regularly - not the total, multiplied by the number of paychecks for the rest of the year and deduct that amount from the total tax.

 

[LuvN~Travel]

Hmmmm, I hope it works that simple. I checked on my taxes recently and realized that the amount coming out really wasn't as large as I had expected. Since we have gotten refunds all of our married life, and usually around $2000 annually, I changed our withholding to a lower level to help offset the new mortgage payment difference (from our rent that is) for the first several years of our loan. (DH's raises in the next couple of years should begin to make up that difference though and then we can change it back).
I was figuring that it would be similar to a lottery type win. About a 30% type deal. If it is taxed similar to just 'regular' income that could be great!
Now for the waiting part.....
Kim