Payment for lost wages, which can be claimed for up to three years after a car accident, are not taxable. They are, however, reduced to only 85% of the income the victim would have made. Those who are likely to remain incapacitated for longer than three years and your attorney claims excess wage loss, any further settlement will be taxed as income. Additionally, if your lost wages exceed the monthly maximum ($6,065 in 2022, with an increase every October), the amount above the maximum will be taxed.