How the Tax Code Treats Personal Injury Settlements


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question 1 of 3

Which of the following is TRUE about the taxation of a settlement for a purely emotional injury?

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1. If an injured person receives a settlement that equally compensates physical and punitive damages, how would this settlement be taxed?

2. Under what circumstances would an injured party owe any tax on a settlement for a physical injury?

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About This Quiz & Worksheet

When you work through the quiz and worksheet, you can see how much you know about personal injury settlements under the tax code. When an injured party would owe tax on a settlement for a physical injury and the settlements that are and are not taxable are topics you need to know for the quiz.

Quiz & Worksheet Goals

Test your familiarity with:

  • Taxable status for settlements of a purely emotional injury
  • Types of settlements that are taxable
  • Compensation for physical injuries

Skills Practiced

  • Information recall - access the knowledge you have gained about how the settlement would be taxed for an injured person who gets money for physical and punitive damages
  • Reading comprehension - ensure that you draw the most important details from the lesson on personal injury settlements and taxes
  • Interpreting information - verify that you can read information about when an injured party would owe tax for a settlement on a physical injury and interpret it correctly

Additional Learning

How the Tax Code Treats Personal Injury Settlements is a lesson that allows you to discover more material about:

  • When a personal injury settlement can occur
  • Situations when courts award interest on damages
  • How to be tax exempt when receiving a personal injury settlement