Hulk Hogan recently settled his suit with Gawker for $31 million after four years of litigation. Hogan brought the invasion of privacy suit over Gawker’s posting of a Hogan sex tape. While a $31 million settlement seems like nice deal for Hogan, we cannot forget the legal fees and taxes owed to the IRS.
Attorney fees are often a surprising tax trap for many plaintiffs. When a plaintiff uses a contingency Attorney, the settlement to is treated as 100% income to the plaintiff for tax purposes. Some settlements are nontaxable (most personal injury cases) – involving physical injury. However, in a case such as Hogan where there was no recovery for physical injury damages, the settlement is treated as taxable income to the plaintiff.