Will I have to pay taxes on my personal injury settlement?

Generally, no. Under federal tax law (IRC § 104(a)(2)), compensation received for physical injuries or physical sickness is not taxable income. This includes settlements and jury awards for medical bills, lost wages tied to a physical injury, pain and suffering, and emotional distress stemming from a physical injury.

However, certain portions of a settlement may be taxable, including punitive damages, interest on the judgment, and compensation for emotional distress that is not connected to a physical injury.

Because tax implications vary by case, consult with a tax professional about your specific settlement. Arnold Law Firm can help structure settlements to minimize your tax exposure.