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Do I have to pay income taxes on my personal injury settlement?

February 9, 2005

Date:  Fri, 21 Jan 2005
From:  Tammy

I was seriously injured on my job and won a settlement. They also have to pay my medical bills for the rest of my life. Do I have to pay income taxes for the award? It is for a physical injury.

Answer

Date:  Mon, 31 Jan 2005

Hello Tammy,

Nonpunitive damages and other amounts received for personal injuries are excluded from taxable income. (IRC Section 104(a)(2).) Punitive damages are taxable, even when they relate to a physical injury.

Good luck!
Mike Gray

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