What's my tax liability on an auto injury settlement?

Under Code Section 104(a)(2), compensatory damages received on account of physical personal injury or physical sickness are excluded from income, irrespective of whether they are received as a result of a judgment or the settlement of a claim. Also, if damages are awarded to compensate for lost wages or profits stemming from the defendant's negligence, the payment is excluded from the recipient's income if the losses were related to a physical personal injury caused by the negligent act.

Basically, I think it is not taxable. If it is a large settlement I suggest seeing a CPA or an EA for help with your return.

Jim KIrby, CPA

Hate to be the bearer of bad news, but that income is taxable. Your best bet would be to make partial payments toward those bills accrued while you were injured and unable to work and set at least 1/3 of your settlement aside for tax purposes. Uncle Sam isn't the big worry -- the State of Michigan will take the biggest bite. This is what we get for allowing Granholm and the Democrats to tax the hell out of people who work while providing a never-ending supply of welfare money to people who constantly have their hands out and never intend to get a job...

Usually, a settlement from an injury/car accident is NOT taxable. I was in a very bad accident in 1991, and received a large settlement myself. According to my attorney, I did not have to pay taxes on an injury award. I have never heard of anyone else having to pay taxes on this type of money.

You are being "reimbursed" for your medical bills and pain and suffering..and those cannot be taxed.

my advice would be to contact the company in which you recieved the check from to see if taxes were already taken out. odds are they werent. so your tax liability depending on your state would be anywhere from 7.25% to 10% but i would definetly save some for taxes and yes all recieved income wether it be from UI, Disability or compensation from an old employer an advance a bonus any of that or settlements out of court or any of that is all taxable income! you can be badly penalized years down the road if you dont put that into perspective. good luck. OH you can also call H & R Block and ask them what amount you should with-hold from that check they can give you a rough estimate.

You'd pay tax on the gain from any investment that you make with the money, including interest on a CD. Only the initial principal amount comes to you without being taxed.

This might be feasible

None!