Hi and welcome to our site!If the monthly payments were not taxable the lump sum to settle your future payments will also not be taxable.
General rules to determine if payments are taxable or not are based on the type pf your accident or health insurance plan - not on the form of paymentSee here - http://www.irs.gov/Help-& amp;-Resources/Tools-&-FAQs/FAQs-for-Individuals/Frequently-Asked-Tax-Questions-&-Answers/Interest,-Dividends,-Other-Types-of-Income/Life-Insurance-&-Disability-Insurance-Proceeds/Life-Insurance-&-Disability-Insurance-Proceeds-1
Thank you Lev!
If you pay the entire cost of a health or accident insurance plan, do not include any amounts you receive for your disability as income on your tax return.
The same rule applies for periodic payments and for the lump sum payment to compromise these periodic payments.
Yes, that is what I have done that last two years but wanted to make sure that taking a lump sum didn't change the whole law. Thank you!
That is correct - the character of benefits - periodic payments or the lump sum payment - doesn't affect the tax treatment of benefits.