The quick answer is damages or awards received for physical injuries or sickness are generally not taxable. However, punitive damages or awards are generally taxable if they are paid to compensate a taxpayer for non-personal injuries. Internal Revenue Code (IRC) Section 104 is the area of law that defines the taxable treatment of compensation for injuries or sickness. Continue reading
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I learned a lot from this post, much appreciated!! 🙂
Glad it was helpful. This area of tax law can be confusing.
In 2016, I was injured on-duty as a Police Officer. My employer provided Long Term Disability Insurance and I filed a claim with them. I had to retain an attorney as the LTD Insurance denied my future monthly benefits. I am expecting a settlement. My question is, would this settlement for future monthly benefits be taxable and would treble damages or mental anguish be taxable ? Thank you for any information that you can offer.