Is the Settlement my Injury Lawyer Obtains for Me Taxable?

Assume that we tried or settled your car accident Injury case and now you are trying to determine what your actual recovery will be. Many of my clients call and ask, what will I have to pay in taxes? The answer is, probably nothing.

Compensation for pain and injuries is not gross income under the tax code. Generally speaking, unless you received money for punitive damages in Georgia or lost wages, there is no tax on the money recovered.Generally speaking, all income is taxed. So if you get income, it will be taxed. The key here is that injury settlements are compensation and not income, so there is no tax. The exceptions are if you got paid for lost income or punitive damages. The portions of your settlement allocated to those sections would be taxed. Under Treasury Regulation § 104(a)(2), damages received through verdict or settlement because of injuries is not income.
