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In most cases, car accident settlements are non-taxable. However. Depending on how your settlement is structured, you may have to pay taxes on a portion of your proceeds. Settlement negotiations should include tax considerations to ensure the money that is needed to compensate for lost wages, medical expenses, and related damages is not siphoned off by the IRS. This is one reason it makes sense to have an attorney on your side before you enter settlement negotiations.


Damages awarded in a car accident that may be taxable include:

  • Wage reimbursement. This may include wages lost during recovery or expected losses due to permanent injury. Wages are taxable under all circumstances, even when they are part of an award
  • Interest. Like interest earned on an investment, interest earned from a car accident settlement may be taxable
  • Damages for emotional suffering. Awards for emotional suffering, along with any punitive damages may be taxable

Damages for physical injury are not taxable so long as you have not taken an itemized deduction for expenses related to the injury in a prior tax year. Damages for medical bills are tax exempt as well.


There are a few options for reducing the amount of tax you have to pay on a settlement. Structuring large settlements can reduce some of the tax burdens. So too can ensuring damages are correctly classified for your claim. Working with a qualified and experienced personal injury attorney can help as well.

The attorneys at Lourie, Chance, Forlines, Carter & King, PC have decades of experience helping families in the Atlanta area get full and complete settlements that cover all current and future expenses. We take time to build cases that take into account how an injury has and will continue to impact a person’s life – and we classify damages and fight for settlements that minimize tax burdens while maximizing compensation for medical expenses, lost wage, and personal pain and suffering.

There is no guarantee against paying taxes on your car accident settlement, but there are ways to reduce the losses those can produce. If you live in Atlanta, Savannah, Columbus, or surrounding areas of Georgia, Lourie, Chance, Forlines, Carter & King, PC is here to review your case free of cost and obligation to help you determine the best path forward.

To schedule your complimentary consultation at our Atlanta office, please call 404-760-7400 today.