General Question

Skaggfacemutt's avatar

Do you have to pay taxes on an insurance settlement?

Asked by Skaggfacemutt (9780points) January 14th, 2014

If you get a large payout from an insurance settlement (say, life insurance, for instance), do you have to pay taxes on it? What about a structured settlement? Money from a trust fund?

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6 Answers

filmfann's avatar

When I got a settlement for an accident, I asked several times, and was told I do NOT have to pay taxes on that.

Judi's avatar

I believe not.

YARNLADY's avatar

You have asked two entirely different questions.
Insurance likely no.
Money from a trust fund might be yes.

Pandora's avatar

I don’t know about that. My brother in law got a huge settlement and said he found out years later that he had to pay taxes on it. He said his lawyer originally told him no. But then again, maybe he didn’t bother to check into it and he was being taxed for money sitting in his bank account. Best thing to do is go to an IRS office nearest you and ask them about it. Then get a written statement of some kind that says you don’t have to pay in case they think it is just money sitting around out of the blue.

Judi's avatar

@Pandora, I would trust a CPA rather than a random IRS agent.

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