If you've received a monetary settlement from an auto accident or personal injury claim in the past year, the good news is that most of the time you do NOT have to pay taxes on that money. However, there are some exceptions to that rule.
Did You Recover for Property Damage Loss?
Settlement for damage and repairs to your vehicle and the cost of a rental car is not subject to taxes.
What About Your Medical Expenses
Settlement for medical bills and expenses are reimbursement and therefore not taxable.
Did You Get an Award for Pain and Suffering
Fortunately, physical pain and suffering are not taxable but emotional distress may be subject to taxation.
Did You Get a Settlement for Lost Wages?
Compensation for lost wages IS subject to Income Tax because your regular income would have been.