TITLE 26 > Subtitle A > CHAPTER 1 > Subchapter B > PART III
104. Compensation for injuries or sickness

Release date: 2005-08-31

(a) In general
Except in the case of amounts attributable to (and not in
excess of) deductions allowed under section 213 (relating to
medical, etc., expenses) for any prior taxable year, gross
income does not include-
(1) amounts received under workmen's compensation acts as
compensation for personal injuries or sickness;
(2) the amount of any damages (other than punitive damages)
received (whether by suit or agreement and whether as lump
sums or as periodic payments) on account of personal
physical injuries or physical sickness;
(3) amounts received through accident or health insurance
(or through an arrangement having the effect of accident or
health insurance) for personal injuries or sickness (other
than amounts received by an employee, to the extent such
amounts
(A) are attributable to contributions by the employer which
were not includible in the gross income of the employee, or
(B) are paid by the employer);
(4) amounts received as a pension, annuity, or similar
allowance for personal injuries or sickness resulting from
active service in the armed forces of any country or in the
Coast and Geodetic Survey or the Public Health Service, or
as a disability annuity payable under the provisions of
section 808 of the Foreign Service Act of 1980; and
(5) amounts received by an individual as disability income
attributable to injuries incurred as a direct result of a
terroristic or military action (as defined in section 692
(c)(2)).

For purposes of paragraph (3), in the case of an individual
who is, or has been, an employee within the meaning of
section 401 (c)(1) (relating to self-employed individuals),
contributions made on behalf of such individual while he was
such an employee to a trust described in section 401 (a)
which is exempt from tax under section 501 (a), or under a
plan described in section 403 (a), shall, to the extent
allowed as deductions under section 404, be treated as
contributions by the employer which were not includible in
the gross income of the employee. For purposes of paragraph
(2), emotional distress shall not be treated as a physical
injury or physical sickness. The preceding sentence shall
not apply to an amount of damages not in excess of the
amount paid for medical care (described in subparagraph (A)
or (B) of section 213 (d)(1)) attributable to emotional
distress.

Milt Baker CPA

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >

I received a settlement from my former employer in the
amount of $4,500. I was injured on the job and my employer
did not have workers compensation insurance. We settled out
of court with the above amount, which was to cover medical
bills and benefits that I would have received. Am I going
to have to pay taxes on this? If so, doesn't seem fair
since medical services that I am being reimbursed for did
not tax me. Also, workers compensation benefits are not
taxed either. Thanks.

Jason

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2005) - All rights reserved. > << ================================================== ===== >