To answer this simply, no not usually. The IRS Code Section 104(c) says that money you receive from personal injury settlements is not considered gross wages to you. Therefore, it is tax free.
After we settle our clients’ cases, we generally insist that there is a reference to this code in the release. This guarantees that there isn’t any confusion when clients file their taxes. Clients can simply show their release to the tax accountant and say that because the money received was on account of a personal injury, it should not be taxable.
It is important that you discuss your settlement’s tax issues with your attorney. If they have your best interest at heart, they should know this information. If you have any questions about whether the money you receive through a settlement is taxable, just give us a call. We’d be happy to help.