Skip to content
Call or Text Now (618) 641-9189


99% Success Rate Millions Recovered Contact Us

Are Personal Injury Awards or Settlements Taxable?

A question we receive from our clients all the time is whether a settlement is taxable income.  This is an important question to have answered so that you can plan in advance of any potential settlement in order to reduce the tax implications.  The good news is that, generally, any settlement for physical injuries or sickness is non-taxable by either the state or federal government and you do not need to include the settlement or judgment proceeds in your income.  Publication 4345 (Rev. 4-2015) – Internal Revenue Service.  The thought process behind this general rule is that any personal injury settlement is paid, at least in part, to make the injured party whole, and, taxing this compensation would unfairly punish the recovering party.

Compensation for Personal Injuries are Not Taxable

This general rule is also true for any settlement relating to emotional distress or mental anguish that have originated from a personal physical injury or illness.  For example, if you were injured as the result of another person’s conduct, and that injury robbed you of your ability to provide for your family the settlement amount attributable to your emotional distress or mental anguish arising from that injury is non-taxable.  Conversely, if you receive a settlement for emotional distress that DID NOT originate from a personal physical injury or sickness, a portion of your recovery is taxable.

The IRS also has specific rules about recovery for lost wages/profits and any loss-in-value of property.  Specifically, amounts recovered in settlement for lost wages and/or profits are almost always taxable, while, contrarily, any amount recovered for loss-in-value is generally non-taxable.

Make sure that as much of your Settlement as Possible is Non-Taxable

Sometimes you may have two different types of claims against a defendant, one of which relates to a personal injury, non-taxable, and one which does not and, thus, may be taxable.   If you have a case like this, you would want to make sure that your attorney drafts any settlement agreement in a way to best limit your potential tax consequences.

If you or someone you know has a potential legal matter, call one of the experienced attorneys at Hipskind & McAninch, LLC, at: 618.641.9189 | 314.242.2930 |

Request a free case review
Award Icon

Avvo-Rated Excellent

Award Icon

The Bar Association of Metropolitan St. Louis

Award Icon

Super Lawyers® Rising Stars

Award Icon

The St. Clair County Bar Association

Award Icon

NTA Top 40 Under 40

Award Icon

Nation's Premier Top Ten Attorney

Award Icon

Illinois State Bar Association

Award Icon

AIOFLA 2015 10 Best Client Satisfaction

Award Icon

Proud Member of Belleville Chamber of Commerce

Quote Icon

John Hipskind was amazing! He was reliable, honest, and made me feel confident. John was always there when I had questions and very responsive…

Cori H.
Quote Icon

I can’t say enough good things about John. He truly cares about providing the best possible representation for his clients. I would highly recommend him!

John F.
Quote Icon

Brady did an outstanding job. I didn’t have to do anything or miss any work due to his exceptional service!! I would recommend him to anyone!

Erin H.
Quote Icon

I had a wonderful experience with my attorney Brady. He showed compassion and was always there to answer any of my questions.

Charlotte D.
Quote Icon

Brady helped facilitate my medical appointments, and made sure everything went smoothly. He settled my claim in a relatively short time.

Jeffrey M.
Quote Icon

John Hipskind was always a phone call or text away (we heard back from him within minutes). We are so pleased! You will be happy to have chosen him!

Jess M.