Legal Question in Insurance Law in Washington

Re: Insurance settlement

To be extra-careful, I would check with your tax preparer or a CPA, but unless anything has changed, the answer is NO, a personal injury settlement is not taxable, and it's not reportable to the IRS.

If a personal injury case instead goes to trial or arbitration, and a specific dollar amount is awarded for lost income, then THAT portion may be taxable, since it would be awarded to replace that which WOULD have been taxable. Since a personal injury SETTLEMENT, unlike a trial or arbitration award, comes in a general settlement without any specific amount segregated for lost income, it's generally considered that ALL the settlement is not taxable.

By the way, to the extent that the settlement pays for your medical bills, then those expenses are probably not deductible under the ordinary medical deduction rules. But again, I'm not a tax professional, so I would check with one to be sure.

-- Sam