I recently came across the term “general damages” and am curious about its taxation in Canada. Specifically, I want to know if general damages are taxable in Canada.
If anyone has insight into this or can explain how taxation works on such damages, I’d appreciate the help!
In Canada, general damages, which typically refer to compensation for non-pecuniary losses such as pain and suffering, are generally not taxable. This is because they are considered compensation for the injury or loss rather than income. Under Canadian tax laws, damages received as compensation for personal injury or illness are not included in taxable income.
However, if the damages include an amount for lost income or other financial losses, that portion may be subject to tax. Additionally, if the settlement is related to a business or employment context, there could be different tax implications. It’s always recommended to consult a tax professional or lawyer for personalized advice based on your specific situation.