Notice: Historical Content

This is an archival or historical document and may not reflect current law, policies or procedures.

Are Lawsuit or Accident Settlements Taxable?

Settlements to compensate you for physical injuries or sickness suffered in an accident are tax-free. So is the amount paid to compensate you for loss of your car, or medical expenses, except to the extent that those expenses were deducted in an earlier year and provided a tax benefit.

Punitive damages awarded in a lawsuit, and any damages award for non-physical injuries, are generally taxable.