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Will I be taxed on settlement awards for personal injury?

Antioch, CA |

Other party wants to settle with me for injuries sustained in a car collision. Will I be taxed on this settlement?

Years ago, I had a personal injury suit. The other party settled and paid my $20K. My attorney paid me with two checks under $10K and told me that anyone who brings a check of more than $10K to a bank gets reported by the bank to the IRS. Is this the same today, should I have the settlement drawn in separate checks less than $10K to avoid the bank reporting to the IRS?

Thank You,

Attorney Answers 9


  1. Best answer

    Compensation for physical injuries is not taxable. There is no such thing as the bank reporting you if you have a check over $10,000. If you have cash you are depositing over $10,000 in a single day it is a different story and the bank must report to the U.S. Treasury.

    Any individual seeking legal advice for their own situation should retain their own legal counsel as this response provides information that is general in nature and not specific to any person's unique situation. Circular 230 Disclaimer - Advice given in this response cannot be used to eliminate penalties with the IRS or any other governmental agency.


  2. If the settlement is pain and suffering and No lost wages, its not taxed, but obviously you report it.

    Philadelphia Personal Injury Lawyer. www.InjuryLawyerPhiladelphia.com


  3. P.S. No need for separate checks.

    Philadelphia Personal Injury Lawyer. www.InjuryLawyerPhiladelphia.com


  4. Not taxed.

    No attorney/client relationship is or shall be created by this response on Avvo to non-clients of The Law Offices of Norman Gregory Fernandez.


  5. You cannot be taxed on personal injury award and/or settlements but you can be taxed on settlements for lost wages, that is why I always am very clear to note that my settlements, where possible are for personal injuries.


  6. Personal injury settlements, as long as they are for pain and suffering and not wage replacement, are non taxable. When an attorney handles your personal injury claim they are certain to designate the settlement to pain and suffering and therefore personal injury settlements are a non taxable event.

    Deposits by check are not reported. Only cash deposits of $10,000 or more are required to be reported to treasury. Depositing a check "as cash" would trigger this reporting requirement, but if it is a simple regular deposit into your account, there is no report.

    My office handles personal injury and accident cases in Massachusetts and New Hampshire.

    Law Offices of Andrew D. Myers

    North Andover, MA — Derry, NH

    CLICK HERE: FREE ACCESS TO GENERAL PERSONAL INJURY WEBSITE:
    www.attorney-myers.com


  7. Settlements for personal injury are not taxable income for federal income tax purposes. If any portion of the settlement is designated for lost wages, that portion of it is reportable and taxable.


  8. Damages for personal injury caused by a physical injury are not taxed. I suggest you consult with your current attorney.

    Legal Disclaimer:

    If this information has been helpful, please indicate below.

    Mr. Lundeen is licensed to practice law in Florida and Vermont. The response herein is not legal advice and does not create an attorney/client relationship. The response is in the form of legal education and is intended to provide general information about the matter within the question. Oftentimes the question does not include significant and important facts and timelines that, if known, could significantly change the reply and make it unsuitable. Mr. Lundeen strongly advises the questioner to confer with an attorney in your state in order to ensure proper advice is received.


  9. No, as long as it involved a physical injury

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