Are wrongful death damages taxable?

IRS Publication 4345 states wrongful death damages fall into the category of compensation for physical injuries and are therefore income tax free for the survivors. Note, however, that these damages may be subject to the estate tax if they bring the total ammt of the estate over the statutory exemption.
Further, if punitive damages are awarded as part of the judgment, these may, in certain circumstances be subject to income tax.
Finally, a caution. If there is a nondisclosure clause in the release, the IRS may take the position that that was “bargained for” and hence that all or part of the award is taxable.
Hint: Never sign a release with a nondisclosure agreement unless the defendant agrees to defend and indemnify you if the IRS comes after you for taxes.

If you are looking for an attorney please visit our page: Sacramento Wrongful Death Attorney.
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