Insurance compensation from car accident is taxable or not?

[karentemail]

Hello Turbotax Intuit community:

I had >$6000 pain and suffering compensation from my car accident in 2022, given to me as a check by the insurance company, are these taxable? Thank you very much!

[PattiF]

Car accident insurance settlements are generally not taxable, although there are certain exceptions, according to the Internal Revenue Service (IRS).

Car insurance settlement for pain and suffering: taxes vary
If your pain and suffering is the result of a physical injury, your award is not taxable. However, if your pain and suffering is classified as emotional distress, it is taxable, and you must pay taxes on the amount paid to your attorney.

If, for example, you were not injured in an auto accident, but you developed a fear of driving as a result, compensation for your anxiety disorder would be taxable. However, compensation for emotional distress resulting from a physical injury is tax-exempt.

If you receive a settlement for personal physical injuries or physical sickness and did not take an itemized deduction for medical expenses related to the injury or sickness in prior years, the full amount is non-taxable. Do not include the settlement proceeds in your income.

[karentemail]

Thank you so much! Part of the settlement is actually compensate for my work loss, will that be taxable? Thank you!

[DawnC]

Yes, you usually get a W-2 for the wage compensation portion, which is taxable, just as wages are.   Settlements are taxed or not taxed, according to the type of income they represent.

Are settlements taxable?