Compensation for Forced Sterilization Is Tax Free

Some states have enacted legislation to compensate victims of forced sterilization under state programs and have made payments to those victims. The IRS issued FAQs to clarify the tax treatment of these payments (FS-2023-11). Highlights of the FAQs:

• Compensation payments for forced sterilization are excluded from the gross income of the recipients for federal income tax purposes because the payments are compensatory damages for physical injuries.
• Anyone who received a compensation payment for forced sterilization and included it in gross income on a federal income tax return for a prior year should file an amended return, Form 1040-X, to receive a tax refund.