Here’s a little-known tax fact: Wrongfully incarcerated individuals aren’t required to include in federal taxable income civil damages, restitution or other monetary awards related to their wrongful incarceration. Taxpayers qualify if they’ve been convicted of a covered offense and meet one of the following: 1) They’ve been pardoned, granted clemency or granted amnesty; 2) their conviction has been reversed or vacated and their case was dismissed; 3) their conviction has been reversed or vacated and they’ve been found “not guilty” in a new trial. These individuals aren’t required to report related financial awards to the IRS or include them on their tax returns.
Our Blog 