Question
Are insurance proceeds taxable?
I was in an accident recently where the other driver was at fault. When I get the payout for the damages to my vehicle, will I have to report them as part of my income?
Answer
Thanks for your question! In general, insurance proceeds, or money you receive as part of a claim or settlement, are not taxed. This is because insurance payouts are not actually making you money, but bringing you back to your previous status. The IRS only taxes income, while these proceeds are just "making you whole."Â This goes for bodily injury and property damage payouts.
If you have any further questions, please let us know.Â
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