Do You Have to Pay Taxes on an Injury Settlement in Texas?

No. Texas does not have state income taxes, so you won’t owe state tax on your settlement. Additionally, the Internal Revenue Service (IRS) generally considers compensation for personal injury claims as non-taxable, so you shouldn’t have to pay federal taxes on your settlement, either.

However, there are exceptions. If you received punitive damages or interest on your settlement, you must pay federal taxes on those amounts. Also, if you deducted medical expenses related to the injury in previous years, you might need to pay taxes on that portion of your settlement. An experienced attorney can review your situation and help you comply with all tax regulations.