Legal Question in Personal Injury in California

Generally, personal injury settlement are not taxable income. The reason such settlements are not considered income is because they are designed to make the injured person whole.

Thanks,

Arkady Itkin

http://www.arkadylaw.com

Mr. Itkin's answer is correct if the damages are for pain and suffering. But personal injury awards often include other types of damages as well.

Damages for lost income are usually taxable. The original income would have been taxable, so if the plaintiff could receive the same amount in damages without paying taxes on it then he would reap a windfall. As Mr. Itkin noted, the purpose of such damages is to make the plaintiff whole. Giving him a windfall would not serve that purpose.

Offhand I'm not sure whether damages for medical bills and other expenses are taxable, but I believe they usually are. I believe that punitive damages are taxable.

Medical expenses and general damages are not taxable.The portion of a settlement that represents income is arguably taxable but the settlement proceeds usually is paid in one lump some and not broken down into segments so it would be up to the taxpayer to report the portion that is lost income.The taxable portion could arguably be reduced by attorney fees as fees are usually computed off the top.