Compensatory Damages

Compensatory damages are damages paid to a plaintiff to fulfill actual losses caused by an accident for which compensation is necessary. These damages are meant to restore, at least financially, the state of the plaintiff. They include any loss (mental and physical), injury, or harm that resulted from the breach of duty by the defendant. Common examples of compensatory damages come from property that is lost, loss of wages, medical expenses, costs of repairs, lifestyle changes, and pain and suffering. Opposite compensatory damages are aggravated damages and punitive damages. Punitive damages are those meant to punish the defendant for intentional wrongdoing, and aggravated damages are to compensate for losses specifically resulting from the defendant's conduct.

Fast Facts

  • compensatory damages are not taxable, according to the IRS
  • punitive damages are taxable

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