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Question
Do you know if I would have to claim any settlements I received this year on my taxes being it was a medical settlement. The settlement was for just under $22,000 and I don't want to end up owing money by not claiming it on my taxes
Answer

Great question! If your settlement is due to to physical injury or sickness, it is tax-free and does not need to be reported.

If any portion of your settlement was for lost wages, that will need to be reported and taxed. Your settlement documents should indicate what category the payment falls into, and it could be split. Some of the settlement might be taxable and a portion might be tax-free.

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Sarah York, EA

Sarah is a staff writer at Keeper Tax and has her Enrolled Agent license with the IRS. Her work has been featured in Business Insider, Money Under 30, Best Life, GOBankingRates, and Shopify. She has nearly a decade of public accounting experience, and has worked with clients in a wide range of industries, including oil and gas, manufacturing, real estate, wholesale and retail, finance, and ecommerce. Sarah has extensive experience offering strategic tax planning at the state and federal level. During her time in industry, she handled tax returns for C Corps, S corps, partnerships, nonprofits, and sole proprietorships. Sarah is a member of the National Association of Enrolled Agents (NAEA) and maintains her continuing education requirements by completing over 30 hours of tax training every year. In her spare time, she is a devoted cat mom and enjoys hiking, baking, and overwatering her houseplants.

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