Personal injury settlement
Varies
Are Lawsuit Settlements Taxable?
Short answer: Settlements for physical injury or sickness are tax-free (except punitive damages and interest).
Emotional distress awards without physical injury are taxable, minus medical costs.
Records to keep: Keep receipts, statements (1098, 1098-T, 1099, W-2G), and a note of what each cost was for. Compare itemizing to the 2026 standard deduction before you claim.
BW-B22-00243
high risk
Personal injury settlement
Varies
Individuals / Personal Taxes
Other Expenses
Personal Tax Deductions
Settlements for physical injury or sickness are tax-free (except punitive damages and interest).
BizWriteOffs provides educational information only and is not tax, legal, or accounting advice. Deductibility depends on your specific facts and records. Consult a qualified tax professional.
Business justification
Settlements for physical injury or sickness are tax-free (except punitive damages and interest). Emotional distress awards without physical injury are taxable, minus medical costs.
Category
- Personal Tax Deductions
personal deduction
search demand 2026
losses
other losses