Q&A: Taxes on a wrongful death settlement

Thursday, January 4th, 2007 Litigation

Settlements for wrongful death are tax-free. Although IRS Publication 4345 does not go into a lot of detail, wrongful death claims fall into the category of compensation for physical injuries. Compensatory damages awarded for wrongful death are always income-tax exempt to the survivors. Although punitive damages are usually taxable, depending on the state law, they may be exempt from income in a wrongful death claim.

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http://www.bankrate.com/brm/itax/tax_adviser/20061229_wrongful_death_settlement_a1.asp

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