Taxable or Not Taxable. That is the Question

A question often asked by those who have received settlements in personal injury lawsuits is whether they must include the proceeds of the settlements in their income. The answer, not surprisingly, is that it depends on the facts and circumstances of the case. As a rule, the proceeds received from most personal injury claims are not taxable under either federal or state law.  The IRS does not tax settlement awards if the case demonstrates “observable bodily harm.” Whether you settled the case before or after filing a personal injury lawsuit in court is irrelevant. A settlement payment may consist of various elements that...