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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 11825
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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I have two. One is do I have to pay social security on

Customer Question

I have two. One is do I have to pay social security on alimony and two I got a settlement for bodily injury do I have to pay income tax on that?
JA: The Accountant will know how to help. Please tell me more so we can help you best.
Customer: What else do you need to know? The settlement was the result of an 8 year case and was only for bodily injury. The hospital bills were taken off the top.
JA: Is there anything else important you think the Accountant should know?
Customer: Not that I know of Thank you
JA: I'm sending you to a secure page on JustAnswer so you can place the $5 fully refundable deposit now. While you're filling out that form, I'll tell the Accountant about your situation and connect you two.
Submitted: 1 year ago.
Category: Tax
Expert:  Lane replied 1 year ago.

Hi,

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No, Medicare and Social Security taxes don't apply to the alimony payments you receive, even though alimony is considered part of your income.

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SS & Medicare are taxes that are either withheld from an employee's paycheck by employers and paid to the IRS OR on schedule SE if you are self employed, so it COULD be said that if you are the spouse who is making the alimony payments, you do pay Medicare and Social Security tax on the payments, since they are made with after-tax income.

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On the settlement, no awards and settlements that are for essentially ANYTHING physical (personal injury, sickness, wrongful death, etc) are not taxable.

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You can the IRS guidance on this here: https://www.irs.gov/publications/p17/ch18.html#en_US_2010_publink1000172910

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and here: https://www.irs.gov/pub/irs-pdf/p4345.pdf

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Let me know if you have questions

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Lane

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Expert:  Lane replied 1 year ago.

I hope this has helped.

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Please let me know if you have any questions at all.

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If this HAS helped, and you DON’T have other questions … I'd really appreciate a positive rating (using the rating request, faces, or stars on your screen)

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That's the only way I'll be credited for the work here.

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Thank you!

Lane

I hold a JD (Juris Doctorate, a doctoral degree in the law), with concentration in Tax Law, Estate law & Corporate law, an MBA, with specialization in finance & tax, as well as CFP® and CRPS designations. - I’ve been providing financial, Social Security & Medicare, estate, corporate & tax advice since 1986.