Are personal injury settlements taxable?

Generally, personal injury settlements are not taxable, as you are being made whole for injuries and not compensated for work. However, recoveries for lost wages / income may be taxable, so it is possible that there will be partial tax liability for your personal injury settlement.  If you were injured in 2019 and paid $30,000 in medical expenses, and then deducted $30,000 on your 2019 tax return for medical expenses, $30,000 of the personal injury settlement you receive in 2020 may be taxable.