Do I Need to Pay Taxes on My Settlement?

April Picozzi • April 27, 2025

If you have been injured because of someone else's negligence or recklessness, you may be entitled to compensation. Depending on the case, you may receive a settlement award for medical bills, lost wages, pain and suffering, and other expenses. This financial relief is designed to cover the costs resulting from your injury, but is it taxable? Generally, the answer is no. However, there are some exceptions.


UNDERSTANDING TAXABLE AND NON-TAXABLE SETTLEMENTS


In most cases, compensation for medical bills, property damage, and non-economic damages will not be taxed. Non-economic damages include emotional distress, pain and suffering, loss of enjoyment of life, and other emotional suffering caused by your injury. Since this is not taxable, you will be able to keep the full amount from the insurance company. However, compensation for lost wages will be subject to the income tax, because your wages would have been taxed if you hadn't been injured. Compensation for punitive damages will also be subject to taxes. Thus, part of your settlement may be taxable, depending on the situation.


CALL OUR EXPERIENCED RHODE ISLAND PERSONAL INJURY LAWYERS TODAY AT (401) 229-5521


At Inman & Tourgee, we have more than 125 years of combined legal experience. Our team of Rhode Island personal injury attorneys have dedicated their careers to helping injured clients seek justice from negligent parties. If you or a loved one have suffered injuries because of someone's negligence, we can help you file a claim and negotiate a settlement with the insurance adjuster. Contact us today to discuss your case with one of our passionate legal advocates. We offer free consultations to all prospective clients.

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