I am awaiting word on an insurance settlement from a car accident....when the insurance company settles and sends a check, will I pay income tax out of that? Just trying to find out because I want no trouble with IRS............thanks in advance
2007-12-05 05:12:35 · 3 answers · asked by misterpetee 3 in Business & Finance ➔ Taxes ➔ United States
Usually not, but part could be taxable depending on exactly what it's for.
2007-12-05 05:16:08 · answer #1 · answered by Judy 7 · 2⤊ 0⤋
I don't believe so. But here is part of the answer and the link below should answer your question. If you used a lawyer ask him/her. I got the info below from the link in "know your source"?
Thus, for settlements (or awards) paid after August 20, 1996, only those payments attributable to a physical injury or sickness are tax free. Lost wages, compensatory and punitive damages arising from claims of employment discrimination are taxable, except for actual medical costs due to emotional distress. Because the payments are taxable to the plaintiff, the employer must report the payment, either on Form 1099 or W-2.
2007-12-05 13:28:23 · answer #2 · answered by SGT V 6 · 0⤊ 0⤋
The settlement should specify what the money is for.
Payment for the damage to your car (but not replacement value), not taxable.
Payment for medical expenses, not taxable.
Payment for lost wages, taxable.
2007-12-05 13:17:58 · answer #3 · answered by Anonymous · 1⤊ 0⤋