Question

If I received insurance claim income for an auto-accident injury I suffered, is this insurance claim taxable income that I have to report?

Answer

Your insurance claim income is probably not taxable. If there’s nothing to indicate what the payment is for, it’s likely that it’s meant to cover medical expenses and “pain and suffering.” If this is the case, you don’t have to include the amount in your income.

However, insurance claim taxable income might be an issue and you must include the reimbursement as income if either of these is true:

  • You reported the resulting medical expenses as itemized deductions in a prior year.
  • The funds were designated for something else — Like reimbursement for lost income.

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