En Español
Lipsig, Shapey, Manus & Moverman, P.C Logo

Do You Pay Taxes on Personal Injury Settlements in NY?

February 15, 2021
dollar bills

Taxes are complicated, and personal injury claims are complicated. When you combine the two, things become more complicated still. Better understanding how your personal injury settlement will (or will not) be taxed can help you move forward with greater clarity. If you have been injured by someone else’s negligence, you owe it to yourself and to your claim to work closely with an experienced NYC personal injury attorney.

Your Recovery

If someone else’s negligence leaves you injured, you need compensation that is commensurate with the damages you’ve incurred in order to reach your optimal recovery. These damages can generally be categorized as follows:

  • Medical costs
  • Lost wages
  • Emotional and physical pain and suffering

Costs Associated with Physical Injuries

The costs associated with the physical injuries you’ve endured and been compensated for will not be taxed by the IRS, including all of the following expenses:

  • Emergency treatment and transportation
  • Surgery and follow-up care
  • Treatment from doctors and specialists
  • Medical testing
  • Rehabilitation
  • Physical therapy
  • Prescription medications
  • Adaptive physical devices
  • Home health care

Additional damages related to your physical injuries will similarly go untaxed, including:

  • Your diminished earnings due to time lost on the job (including any decrease in earning potential)
  • Associated attorney fees
  • Property damage (damage to your car in a traffic accident, for example)

There are, however, exceptions to this no-tax rule.

Your Pain and Suffering

The physical and emotional pain and suffering associated with your personal injury claim can be immense. These damages are considered non-economic damages (they have no actual price tag attached), and the associated compensation you receive is taxable. The psychological effects of being injured as a result of someone else’s negligence can be very difficult to overcome and can include all of the following:

  • Symptoms of depression and/or increased anxiety
  • Changes in mood and/or personality
  • Emotional lability
  • Problems related to focus, sleep, and/or eating
  • Pronounced irritability
  • Difficulty handling situations that one formerly had no difficulty with
  • Lost or weakened relationships and a diminished support system
  • Difficulty moving forward with one’s goals and life plans

Additional Factors

Sometimes, a court will deem the at-fault party’s negligence or recklessness so egregious that punitive damages (meant to punish him or her) are awarded. These non-economic punitive damages are also taxable. Finally, if you are awarded any interest payments related to your compensation, that part of your settlement or court award will be taxed. 

Consult with an Experienced New York City Personal Injury Attorney Today

Being injured as a result of someone else’s negligence is an exceptionally difficult experience but obtaining the compensation to which you are entitled is critical to your ability to fully recover. The dedicated personal injury attorneys at Lipsig, Shapey, Manus & Moverman have been proudly serving New York City residents for decades – and have earned their stellar reputation for helping clients like you obtain favorable claim resolutions one case at a time. Your case matters, so please don’t wait to contact us online or call us at 212-285-3300 for more information today.


This field is for validation purposes and should be left unchanged.

"This law firm has great lawyers!" I had an accident and they got me what I deserved for my injury. They treat you like you are part of their family. If anyone needs a lawyer I will recommend this firm."