When you win a lawsuit, you can take your money in a single lump sum or slowly over time as a structured settlement. Learn the pros and cons of each approach.
You may have heard that lottery winners can take their award in a single lump sum, or slowly over time. And you might also have heard that they get taxed much higher when they take their money in a single sum.
Personal injury settlements work similarly, although they do have some differences.
Let me explain the facts:
You Most Likely Won’t Get Taxed
In the majority of cases, any funds you receive from a personal injury settlement are not income and, therefore, not taxed.
However, those lovable individuals at the IRS (yes, sarcasm intended) do have a few exceptions to this. If you like reading tax code, you can learn more at the IRS website.
One such exception is:
If you deducted any medical expenses in prior […]