Do You Have to Pay Taxes on a Personal Injury Settlement?

If you’ve received a personal injury settlement in Oklahoma, you might be wondering: Do I have to pay taxes on this money? The good news is that, in most cases, the answer is no. However, there are some exceptions to be aware of.

Tax-Free Compensation

According to the IRS, settlements for physical injuries or illnesses are generally not taxable. This means if you received compensation for medical expenses, pain and suffering related to a physical injury, or lost wages due to your injury, you do not have to report that money as taxable income. Oklahoma follows federal tax guidelines in this regard.

Exceptions to Keep in Mind

While most personal injury settlements are tax-free, there are a few situations where you may owe taxes:

• Punitive Damages – Unlike compensatory damages, which aim to reimburse you, punitive damages are meant to punish the defendant. The IRS considers these taxable income.

• Emotional Distress Without Physical Injury – If your settlement includes compensation for emotional distress or mental anguish without a related physical injury, it may be taxable.

• Interest on the Settlement – If your settlement accrued interest before you received it, that interest is taxable.

• Medical Expenses Deducted on Previous Taxes – If you previously deducted medical expenses on your tax return and later received a settlement covering those same expenses, that portion may be taxable.

Consult a Professional

Tax laws can be complex, and every case is unique. To ensure you handle your settlement properly, it’s always a good idea to consult with a tax professional or attorney. At Double Horn Injury Law, we’re here to help you navigate your personal injury case from start to finish.

📞 If you have questions about your settlement, contact us today for a free consultation.