The settlement amount you receive in a wrongful death claim remains untaxable, according to the Internal Revenue Service (IRS) in IRS Rule 1.104-1. The IRS makes the wrongful death settlement non-taxable because it classifies as part of a claim that resulted from personal injuries or physical illness.

Is wrongful death settlement considered income?

When receiving this amount of money, a family may wonder if they have to claim the settlement as income on their tax returns. Typically, a wrongful death settlement will not be considered income. For this reason, in most cases, the amount will not be taxed, according to the Internal Revenue Service (IRS).

What type of legal settlements are not taxable?

Settlement money and damages collected from a lawsuit are considered income, which means the IRS will generally tax that money, although personal injury settlements are an exception (most notably: car accident settlement and slip and fall settlements are nontaxable).