How do I report my GM ignition switch lawsuit settlement as taxable income on my 2025 taxes?

14 You're right that most lawsuit settlements are considered taxable income, but it depends on what the settlement was compensating you for. For a GM ignition switch settlement, it typically breaks down like this: if the money compensates you for physical injuries or physical sickness, that portion is NOT taxable. If it compensates you for emotional distress stemming from physical injuries, that's also not taxable. However, if the settlement is for lost wages, punitive damages, or emotional distress not from physical injury, those portions ARE taxable. Assuming the entire $8,750 is taxable, you would report it on Schedule 1, Line 8z - "Other Income" with a brief description like "lawsuit settlement." GM may or may not send you a 1099-MISC - they're required to if the amount is $600 or more, but sometimes companies miss this. Either way, you're still responsible for reporting the income. I recommend hanging onto any documentation about the settlement that specifies what the payment was for - this will help determine the taxable portions.

7 After dealing with a similar situation last year, I found that using https://taxr.ai really helped me figure out how to properly report my lawsuit settlement. I was totally confused about what portions were taxable and where to report them. I uploaded my settlement documents and the AI analyzed everything, breaking down which parts were taxable and which weren't. It even gave me specific directions for which tax forms to use and which lines to fill out. Saved me from potentially making a costly mistake!

19 I was skeptical about using an AI tool for my settlement tax questions, but I finally tried https://taxr.ai and it was actually really helpful. My situation involved a workplace lawsuit settlement that had multiple components - lost wages, emotional distress, and punitive damages. The tool correctly identified that the lost wages portion was subject to employment taxes, while other parts were only subject to income tax. It even explained that I needed to report the attorney fees as income and then take them as a deduction in a different section. Matched exactly what my CPA later told me, but saved me a $200 consultation fee. Definitely worth checking out if you're dealing with settlement money.

5 I had a similar issue with reporting a different settlement and spent WEEKS trying to get someone at the IRS to answer my questions. Kept calling that 800 number only to be disconnected after waiting for hours. Eventually found https://claimyr.com and watched their demo at https://youtu.be/_kiP6q8DX5c - they got me connected to an actual IRS agent in less than an hour! The agent confirmed that my settlement needed to be reported on Schedule 1 as other income, and cleared up my confusion about which parts were taxable. So much better than guessing or spending hundreds on a tax professional for a simple question.

8 I just wanted to follow up - I actually tried Claimyr after seeing this post and it legitimately worked! After months of trying to reach someone at the IRS about how to report my settlement, I was connected to an agent in about 45 minutes. The agent walked me through exactly how to report my settlement on Schedule 1 and confirmed which portions were taxable. What surprised me was how the agent took time to explain the different tax treatments for various types of settlements - way more helpful than any of the generic advice I found online. They even emailed me some specific IRS publications to reference. Definitely using this service again next time I need to talk to the IRS!

22 One thing to watch out for with settlements - sometimes the company will withhold taxes before sending your payment. Check if the $8,750 is the gross amount or net after withholding. If they withheld taxes, you should receive a form showing those withholdings that you can credit against your tax liability.

11 Does anyone know if attorney fees for these cases are deductible? I got a settlement too but almost 40% went to the lawyers. Do I report the full amount or just what I actually received?

Just to add another perspective - I went through something similar with a different class action settlement last year. The key thing I learned is that you absolutely need to keep detailed records of everything related to the settlement. Make copies of your settlement check, any correspondence from the law firm, and especially any documentation that describes what the settlement was for. Even if GM doesn't send you a 1099, having this paperwork will be crucial if the IRS ever questions the reporting. Also, if you're unsure about the tax treatment, consider making quarterly estimated payments on at least a portion of it. Better to overpay slightly and get a refund than to owe penalties for underpayment. The IRS safe harbor rule generally protects you if you pay 100% of last year's tax liability (110% if your prior year AGI was over $150,000). One more tip - if this settlement pushes you into a higher tax bracket, you might want to look into whether you can spread the recognition of this income over multiple years, though that's typically only available in very specific circumstances.