When someone receives money through a lawsuit or settlement after experiencing sexual assault or sexual harassment, current federal tax law may require them to pay income taxes on portions of that money — including punitive damages, back pay, and reimbursed attorney fees. The Tax Fairness for Survivors Act would make all such payments completely tax-free, whether received as a lump sum or in installments. The exemption covers the full range of compensation: damages, backpay, frontpay, punitive awards, and settlement payments. Social Security, unemployment, and railroad retirement taxes are also excluded, so survivors would owe no payroll taxes on these amounts either.
Average Household Impact
- Tax exclusion for survivors — Settlement and judgment proceeds from sexual assault and harassment claims excluded from federal income and payroll taxes
Congressional Summary
Tax Fairness for Survivors Act This bill excludes certain payments related to sexual assault or sexual harassment claims from gross income for federal tax purposes.Specifically, the bill excludes from gross income amounts received by an individual from a judgment, award, or settlement of a claim (including backpay, frontpay, punitive damages, attorney’s fees, or any payments made to release, resolve, or settle a claim) related to sexual harassment or a nonconsensual sexual act or sexual contact. Further, under the bill, such amounts are not wages or compensation and, thus, not subject to certain payroll taxes (Social Security, railroad retirement, and unemployment insurance).Under current law, amounts received from a judgment, award or settlement of a claim may be excluded from gross income if attributable to a personal physical injury or physical sickness. However, under current law, compensatory and other amounts received from a judgment, award or settlement unrelated to a personal physical injury or physical sickness generally are included in gross income. (Some exceptions apply.)
Details
- Congress
- 119th
- Chamber
- House
- Status
- summarized
- Action
- Introduced in House
- Action Date
- 2025-02-13
- Date Added
- 2026-06-13
- Source
- Congress.gov →
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