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 » From: Southhampton, MA Dear TaxMama: This year I settled with an insurance company representing a grocery store for $130,000. I fell in their unlit parking lot and destroyed my knee. I have had knee surgery and will need more surgery. When the check came to me there was no tax taken out. Do I claim it now as income on my 2004 taxes? Thank you, Terri Hi Terri, Talk to your tax pro - and perhaps your attorney, to be sure exactly what the check was paying you for. If it was all for physical injury and medical costs, you'll have no taxes to pay. But if the agreement spelled out that part of it was for loss of income, or other income-related items, you may well have to report that part of the money and pay taxes on it. Generally, though, they hardly ever do a breakdown for a physical injury settlement, specifically so they don't spell out that part of your money is for loss of income. They're trying to help you receive it all tax-free. That's the game. But make sure you read the settlement paperwork. You don't want to find out later on that part of it was taxable - and not have the money to pay the taxes. I hope you're feeling better. Best wishes, Eva Rosenberg Your TaxMama  |
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