Visitor Question

Is Settlement Money Taxable?

Submitted By: Victoria (Colchester VT US)

Is the money that you receive from a settlement for an injury taxable? And if so how much? Thanks for any info you can give.

Disclaimer: Our response is not formal legal advice and does not create an attorney-client relationship. It is generic legal information based on the very limited information provided. Do not rely upon the information in our response, or anywhere else on this site, when deciding the proper course of a legal matter. Always get a personalized case review from a local attorney.

Answer

Dear Victoria,

This is an excellent and common question. Settlement money that is attributed to physical injury, pain and suffering is not taxable because it is not considered “income.” Settlement money that is identified as income replacement or lost wages is taxable just as income you would have actually received would be.

This is why the language of a settlement release must be accurately drafted.

The above is general information. Laws change frequently, and across jurisdictions. You should get a personalized case evaluation from a licensed attorney. Find a local attorney to give you a free case review here , or call (888) 647-2490.

Best of luck,

Published: July 27, 2010

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