Submitted By: Jack
Answered: May 13, 2014 8:30 am

I received a legal settlement from an insurance company as a result of my sister’s death in a car accident (I’m her next of kin). Is this taxable to me?

Sorry about your personal loss. The settlement is tax free to you because it is compensation for personal physical injury. However, if any part of the settlement is for punitive damages, those are taxable.

advertisement
Tax Glossary

Taxable income

Net income after claiming all deductions from gross income and adjusted gross income, such as IRA deductions, itemized deductions, or the standard deduction, and personal exemptions.

More terms