THE TRANSATLANTIC MAGAZINE
THE TRANSATLANTIC MAGAZINE
Donald Trump is reported to be suing the BBC for $10 billion in damages.
Should he eventually receive either that sum or a lesser amount in damages, he would be liable to pay US Federal Income Tax on whatever the Court awards. This would be the case irrespective of whether the damages awarded are received in a single lump-sum or a series of periodic payments.
Damages awarded by a Court are only exempt from taxation in the USA, if received on account of physical injury or physical sickness.
It is understood that President Trump is suing the BBC on two counts. These are for
Defamation ($5 billion), and
Violation of Florida’s Deceptive and Unfair Trade Practices Act ($5 billion)
Neither of these would appear to involve President Trump having suffered either physical injuries or physical illness.
Should President Trump claim that the BBC’s actions have caused him emotional distress, that would involve a non-physical injury. An award of damages on account of any emotional distress only escapes taxation if the specific emotional distress involved is directly attributable to an established physical injury or physical sickness.
Nevertheless, any amounts awarded for the cost of medical care attributable to emotional distress would be excluded from taxation.
We don’t know about Donald Trump’s other sources of income or gains, other than his salary for being President of the USA. It is presumed that Donald Trump will be using the filing status of a married individual, filing a joint return with his spouse. Meaning he will have a marginal tax rate of 37% and could potentially be paying a tax bill of $3.7bn on any damages he is awarded.
The 2026 US tax tables are below for reference.
John Havard is a UK/US private client consultant at leading audit, tax and business advisory firm, Blick Rothenberg. www.blickrothenberg.com
