The best way to avoid paying unnecessary taxes on a lawsuit settlement is to partner with an experienced attorney.
The American Bar Association recommends that the plaintiff’s lawyer work with the defendant’s lawyer to minimize unnecessary taxes.
You may want to take installment payments instead of a lump-sum payment as a lump-sum payment could push your income into a higher tax bracket.
Again, an experienced attorney will know the different variables that can affect a client’s net settlement payout and will work to minimize your tax burden while following applicable tax laws.