Do I Have to Pay Taxes on a Car Insurance Settlement?

[Doris2022]

Hello

Last year I had a car accident in July, and received 2 payments: one to cover my car value, and the other one to cover therapy and recovering treatment. Should I include those values in my income for the year?

[JulieS · Accepted solution]

No, generally a car accident settlement is not taxable and you don't have to report it. 

• Payments for damage to your car are not taxable.
• Payments for medical expenses are not taxable.
• Payments for pain and suffering are not taxable.
• Payments for lost wages are taxable.

If a part of your settlement is for lost wages, you do need to report that part only as taxable income.