Are payments made for a personal injury settlement tax deductible?

by David A. Caplan, CPA | Aug 09, 2018

I paid $7,500 to a personal injury settlement. Is the payment I made tax deductible?

Assuming that you mean legal fees, no. Under the new tax law, legal fees paid are no longer deductible, unless you are a business and it was paid as a business expense. If you mean that you settled a claim, it depends on your structure (whether you’re a business or just an individual) and on the facts of the case. Chances are that it is not deductible, but I recommend consulting a CPA with more information to ensure that’s the case for your specific situation.

For more resources, check out PICPA’s Money & Life Tips, Ask a CPA, or CPA Locator.

Answered by: David A. Caplan, CPA, is a sole practitioner in Lafayette Hill, Pa.

The responses are based on the limited information provided by the questioner and apply the laws and regulations at the time of posting. Other options could arise as rules and regulations may change over time, including but not limited to the passage of the Tax Cuts and Jobs Act of 2017. They are intended to provide general information, not specific accounting or tax advice; they are not intended or written to be used and cannot be used for the purpose of avoiding or evading taxes or penalties under the IRS code or regulations. Views expressed do not imply an opinion of the PICPA, its officers, directors, employees, or members.
Financial FAQs

Search the most frequently asked finance and accounting questions and read the responses from PICPA members. Always consult a CPA before taking action.