Taxation Of Damages

About Taxation Of Damages

Section 104(a) of the Internal Revenue Code excludes from gross income the amount of any damages, other than punitive damages, received as a result of personal physical injuries. The government does not tax a physical injury recovery because it is designed to make you whole again after the injury. The same holds true for amounts received on account of physical injuries suffered on the job (workers’ compensation claims). Section 104(a) provides in relevant part: (a) In general Except in the case of amounts attributable to (and not in excess of) deductions allowed under section 213 (relating to medical, etc., expenses) for any prior taxable year, gross income does not include – (1) amounts received under workmen’s compensation acts as compensation for personal injuries or sickness; (2) the amount of any damages (other than punitive damages) received (whether by suit or agreement and whether as lump sums or as periodic payments) on account of personal physical injuries or physical sickness; (3) amounts received through accident or health insurance (or through an arrangement having the effect of accident or health insurance) for personal injuries or sickness (other than amounts received by an employee, to the extent such amounts (A) are attributable to contributions by the employer which were not includible in the gross income of the employee, or (B) are paid by the employer) . . . .

TESTIMONIALS

"In my business as a plaintiff’s products liability lawyer, everything begins and ends with our clients. In our firm we never handle a significant case without the assistance of Synergy. Why? Very simple: we trust Synergy with our clients. Yes, Synergy only works with plaintiffs. And yes, they are highly technically proficient and know this business cold. But what makes them different from others is that they listen to our clients, make our clients comfortable with complex issues, and always put the interests of the client first. In my opinion, because of their unique ability to handle people with sincerity and compassion in their time of crisis, they stand head and shoulders above his competition."

Richard Newsome
Newsome Law Firm, Past President of Florida Justice Association

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