Tax on Compensation

[futuresailor]

Hey, just wondering about the tax treatment of compensation lump sums. ie personal injury cases.
Is it true that court awards and negotiated settlements with insurance companies are liable for tax whereas if the award is settled with the Injuries Board it is not subject to tax?

 

[Brendan Burgess]

No, there is no difference.

The awards or negotiated agreements are not subject to any tax.

What might confuse people is that after you receive the money, any interest or capital gain you get on the invested money is subject to the same tax as any other lump sum.

Brendan

 

[Apollo]

The awards from a personal injuries case are subject to tax if the recipient isn't permanently and totally disabled(as a result of the accident for which the compensation was paid) & even if he or she is the investment & reinvestment of the money must compromise more than 50% of the persons total income each year.