f you receive money in a personal injury settlement due to injuries you suffered or because your loved one was killed in an accident, this money is usually exempt from taxes.
Some examples of exempt personal injury awards include:
Annuities from a structured settlement that you receive over a period of time from a life insurer to settle a personal injury claim
Payments from a class-action settlement due to injuries you suffered, such as through the 2015 Alberta Child Welfare Class Action Settlement
A lump sum award for the reimbursement of expenses related to an injury, loss of income, pain and suffering, and other losses in a personal injury claim
However, money that you receive in a personal injury settlement can become non-exempt (and thus taxable) depending on what you do with it. For example, if you use the money from your settlement to personally purchase an annuity or other assets, then any interest that these assets earn could be taxable.