If My Case Settles, Will I Have To Pay Taxes On The Compensation I Receive?

According to the Internal Revenue Service, money received as a result of a South Carolina motorcycle accident claim is not considered income and is, therefore, not taxable. However, for claims that result in an award of punitive damages, that portion of the damages is taxable. Punitive damages are not paid to compensate for the injured party’s expenses, but rather to punish the defendant for particularly reckless behavior. Because these damages do not reimburse victims for the expenses or impacts they suffered as a result of their injuries, the IRS may tax them.