Do you pay taxes on a wrongful death settlement?
The Internal Revenue Service (IRS) does not tax the proceeds of any lawsuit settlements or awards that are intended to compensate victims for their injuries. Because wrongful death lawsuits are intended to compensate victims for their losses, they are generally not taxable for purposes of federal income taxes. This includes:
- Compensation for burial or funeral expenses
- Damages for lost wages and benefits that your loved one was expected to earn
- Reimbursement for medical bills and expenses incurred as a result of the accident
- Compensation for the loss of companionship, care and other intangible benefits
If you have specific questions about whether your settlement will be taxable, consult with your California wrongful death attorney or a tax professional.