Is a settlement for physical sickness taxable?

Erick
Erick Member Posts: 3 Newcomer
edited December 2024 in Situation & Life Changes

I received a settlement for personal physical sickness.

Where do I file that at on your FreeTaxUSA platform? Miscellaneous section? If not there, then where? I was told to use IRC Section 104(a)(2)

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Best Answer

  • MaryM
    MaryM FreeTaxUSA Agent Posts: 7
    Answer ✓

    Hello Erick,

    If your settlement was for physical sickness and you did not take an itemized deduction for medical expenses related to the injury or sickness in prior years, the settlement is non-taxable.

    The IRS provides more details on the taxability of settlements that may be helpful to review depending on all the details of the settlement. You can view that information here:

    https://www.irs.gov/pub/irs-pdf/p4345.pdf

Answers

  • Erick
    Erick Member Posts: 3 Newcomer

    Thank you MaryM, for your prompt answer.

    I did not take an itemized deduction for medical expenses related to the injury or sickness in prior years.

    I will go to the link you provided and review any information there, that is related to the details of my settlement.

    Thanks again, Merry Christmas and Happy Holidays! 🤶🌲🎁

  • BookerFin2025
    BookerFin2025 Member Posts: 2 Newcomer

    Thank you for your reply. Sorry however, the Reply provided did not address the question that was asked. I have seen variations of this answer given several times in several places, but the real answer to the question being asked, by several free tax USA users, is still not being addressed and answered.

    Thank You

  • MatthewD
    MatthewD FreeTaxUSA Team Posts: 581

    Hi BookerFin2025,

    When a settlement is taxable, it can be reported in two possible areas of the software.

    1. If it was reported on a 1099-MISC, then see the Business Income section and fill out a 1099-MISC. Generally the payment is reported in Box 3 as Other Income. Report the income on Form 1040 as Other Income.
    2. If no 1099 was sent to you, you may see the Uncommon Income section and the Other Income option. Scroll to the bottom of the Other Income section and report it as Miscellaneous Income with the amount and Description.

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