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Submitted By: Jack
Answered: May 13, 2014 8:30 am
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.
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Tax Glossary
Self-employment tax
Tax paid by self-employed persons to finance Social Security coverage. In 2007, there are two rates. A 12.4% rate applies to a taxable earnings base of $95,700 or less and a 2.9% rate applies to all net earnings.
