Do I Have to Pay Taxes on My Personal Injury Settlement or Award?
NO TAX /BANKRUPTCY/ESTATE PLANNING ADVICE: Eric Kirk does not handle tax, bankruptcy or trust and estate matters, and does not render legal opinions pertaining to those issues. Please consult a qualified professional in these disciplines.
I’m Attorney Eric T. Kirk not a tax attorney. I do not handle tax cases, and I do not render tax advice. Having said that, here is a common question:
You just got your personal injury award check. Do you get to keep all of it?
Without rendering any opinions, I can point the interested reader to the IRS publication.
- “Personal physical injuries or physical sickness. If you receive a settlement for personal physical injuries or physical sickness and did not take an itemized deduction for medical expenses related to the injury or sickness in prior years, the full amount is non-taxable”
- “If you receive a settlement for personal physical injuries or physical sickness, you must include in income that portion of the settlement that is for medical expenses you deducted in any prior year(s) to the extent the deduction(s) provided a tax benefit.”
- “Emotional distress or mental anguish • The proceeds you receive for emotional distress or mental anguish originating from a personal physical injury or physical sickness are treated the same as proceeds received for Personal physical injuries or physical sickness above.If the proceeds you receive for emotional distress or mental anguish do not originate from a personal physical injury or physical sickness, you must include them in your income.”
I have made it my habit and practice to fully advise my clients on every aspect of their personal injury claim to the best of my ability and experience. In fact, I extend a complimentary case evaluation and strategy planning session to all new clients. When it comes to tax law, however, I recognize the extent of my knowledge ends quickly. I always suggest my client with tax and financial planning professionals to fully determine their obligations and options.