Is a settlement from a personal injury claim taxable?

ANSWER

The BIDaWIZ Team's Answer:

Payments received as compensation for physical injury or sickness are tax free. It doesn't matter if the compensation is related to a court-order or a settlement outside of court. Most courts have ruled that compensation for emotional distress that arises from physical injury or sickness is also tax-free, because the distress is considered attached to the the physical injury or sickness. This includes medical expenses unless you claim a deduction for them. But, if any part of the award is interest for the period between the physical injury or sickness and the time you get paid, that part is taxable.