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Richard, Tax Attorney
Category: Tax
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Experience:  29 years of experience as a tax, real estate, and business attorney.
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I recently received a settlement from an insurance company

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I recently received a settlement from an insurance company for injuries received in a motor vehicle accident. Is this money considered income for tax purposes
Submitted: 6 years ago.
Category: Tax
Expert:  Richard replied 6 years ago.

Good morning. No, this will not be considered income. Here is the summary of why:


The income tax law of the United States has a broad general rule in the notorious Section 61: gross income includes all income.

§ 61. Gross income defined.

(a) General definition. Except as otherwise provided in this subtitle, gross income means all income from whatever source derived. " 26 United States Code [Internal Revenue Code]. § 61

However, an electrical accident claim will generally be a personal injury claim. The good news is that personal injury claims are specifically excluded from federal income tax:

§ 104. Compensation for injuries or sickness.

(a) In general. Except [for] deductions allowed for any prior taxable year, gross income does not include-

(1) amounts received under workmen's compensation acts as compensation for personal injuries or sickness;

(2) the amount of any damages (other than punitive damages) received (whether by suit or agreement and whether as lump sums or as periodic payments) on account of personal physical injuries



I hope this has given you the guidance you were seeking. I wish you the best of luck!


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The information given here is not legal advice. As all states have different intricacies in their laws, the information given is general only. This communication does not establish an attorney-client relationship with you. I hope this answer has been helpful to you.

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