Is My Rhode Island Personal Injury Settlement Taxable?
Personal injury settlements can include payment for various damages, such as lost earning capacity, emotional distress, medical bills, attorney fees, and more. While most financial compensation is considered taxable income, the IRS typically does not have involvement with injury settlements for damages associated with a settled claim. According to the IRS, “If you received 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.” Therefore, a monetary settlement resulting from a physical injury or sickness is not considered income and is non-taxable on the Federal level in Rhode Island. Similar to physical injury or sickness cases, settlements resulting from mental anguish or emotional distress follow the same rules and are not taxable. Compensation for mental anguish or emotional