While the proceeds of some lawsuits are considered income by the IRS, you do not have to pay taxes on a wrongful death settlement.
Only income is taxable by the IRS. If the IRS does not recognize certain funds as income, then income tax laws do not apply. According to IRS Rule 1.104-1, the proceeds of a wrongful death settlement are not taxable.
However, there are exceptions to Rule 1.104-1. Some proceeds from a wrongful death claim may be taxable if they are for interest or for medical bills that have previously been used as a tax deduction. Emotional distress damages may also be taxable if they result from trauma that is not related to bodily injuries.
A Sweet James Victorville wrongful death attorney will help you to answer your questions and protect your rights.