Do you pay taxes on restitution money?

Answer 1

It depends...and the term gets used too many ways so lets use a more general way of understanding it: If the payment, regardless of it's name, is to replace something you have lost, like property or a limb or such, then (as long as you have not deducted that loss as a casualty loss or any other way), it is NOT a taxable payment. If it is for just about anythign else, in lieu of money you didnt make or as a punishment for example, it is taxable to you.