Receiving a settlement for personal injuries could be taxable, consult professionals to minimize tax liabilities.

From Yahoo Finance: 2025-03-24 17:20:00

If you receive a settlement for personal injuries, like from a car accident, it could be taxable. The IRS considers factors like emotional distress damages and attorney’s fees. Consult a tax attorney and accountant before accepting any settlement to understand the tax implications. Some settlements, like for discrimination claims or physical injuries, may be tax-free.

Certain settlement amounts are taxable federally, like punitive damages or back pay for employment discrimination. Other taxable amounts include dismissal pay, severance pay, or damages from wrongful discharge cases. Attorney’s fees in settlement awards must be reported, and proper tax forms filed. Consulting professionals can help structure settlements to minimize tax liabilities.



Read more at Yahoo Finance: How to avoid a high bill