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Insurance settlement taxable by the IRS?

Posted January 8th, 2009 by
Categories: straightguysca.com
  • *Disclaimer* I understand GA is not liable for tax advice and cannot substitute for advice from a tax professional. Is an insurance settlement check considered income by the IRS? This seems like a stupid question, because I'm sure it is, but I'd like documentation or sourcing to show me. Facts: This settlement was from an auto insurer who was paying because I was the passenger in a vehicle that was struck by a hit-and-run driver. The insurance company of the driver of the car I was in settled with me for medical expenses.


  • *How's that for a birthday present? If you have any questions, please *let me know and I'll try to assist. How did you know it was my birthday this month? Good intuition, Hummer. :) Thank you for the sources.


  • Hi grammatoncleric, I have good news! Briefly, compensation received for physical injuries are not included in gross income, as per the "personal injuries" exclusion found in IRC Section 104(a)(2). "Do not include in your income compensatory damages for personal physical injury or physical sickness (whether received in a lump sum or installments). Damages for emotional distress due to a physical injury or physical sickness are not taxable. Punitive damages are taxable. It does not matter if they relate to a physical injury or a physical sickness. For additional information, refer to Publication 525, Taxable and Nontaxable Income, or Tax Topic 422, Nontaxable Income." http://www.irs.gov/faqs/faq-kw22.html Topic 422 - Nontaxable Income: - Accident and health insurance proceeds http://www.irs.gov/taxtopics/tc422.html Publication 525: Other Sickness and Injury Benefits: Other compensation: "Many other amounts you receive as compensation for sickness or injury are not taxable. These include the following amounts: Compensatory damages you receive for physical injury or physical sickness, whether paid in a lump sum or in periodic payments." http://www.irs.gov/publications/p525/ar02.html#d0e6473 Additional Links: "Internal Revenue Code, Section 104, Compensation for Injuries and Sickness: This section of the Code allows claimants to exclude from their gross income monies received for physical injuries or sickness whether by suit or agreement and whether as lump sums or as periodic payments... The text of IRC 104 is excerpted as follows: (a) In General: Except in the case of amounts attributable (and not in excess of) deductions allowed under section 213 (relating to medical, etc., expenses) for prior taxable year, gross income does not include: (1) [deleted] (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 or physical sickness..." http://www.structuredsettlements.org/artman/publish/article_5.shtml "The tax-exempt status is pursuant to the Internal Revenue Code (IRC) Section 104(a)(2). This provision of the tax law states: Gross income does not include [...] 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 or physical sickness." http://www.prudential.com/productsAndServices/0,1474,intPageID%253D1369%2526blnPrinterFriendly%253D0,00.html "Under IRC Section 104(a)(2), the amount of (non-punitive) damages received on account of personal PHYSICAL injuries is not included in gross income." http://www.financial-planning.com/wwwboard8/messages/7434.html How's that for a birthday present? If you have any questions, please let me know and I'll try to assist. Thank you, hummer I searched the IRS site and Google. insurance settlement check taxable "Internal Revenue Code, Section 104" site:.gov irs " Section 104" site:.gov " Section 104" site:.gov "irc section 104(a)(2)" irs


  • Ha! I didn't have a clue about your birthday - I guess I should've said "How's that for a non-birthday present?". Thank you for your non-birthday present too, I appreciate it. Sincerely, hummer







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