A common question that people have when they receive money in a personal injury settlement is whether they have to pay taxes on it. The good news is that money received in a Georgia personal injury case is generally not taxable. Under 26 U.S.C. sec. 104, damages received “on account of personal physical injuries or physical sickness” are not counted as income. The key language in this law is “on account of personal physical injuries.” This means that the money you receive has to be paid to you for damages that result from a physical injury in order to avoid paying taxes on it. There are, however, some exceptions. You may have to pay taxes if you are receiving compensation for medical expenses you received a deduction for in a prior tax return. Punitive damages are generally taxable. Additionally, damages received for purely emotional injuries may be taxable if there was not an underlying physical injury.

If you have any questions about whether you will have to pay taxes on money you will be receiving in a personal injury case, make sure you speak with an experienced accountant.