Are Bodily Injury Insurance Settlements Taxable to the IRS?
As a rule, you will find car insurance settlements to be taxable does not apply if bodily injury is involved. There is only one special case where something might be considered taxable, and that is if the settlement not only fixes but improves the vehicle’s value. At that time, the IRS may consider it taxable because the value of something you own increases. Even then, the IRS usually doesn’t get involved, so for all intents and purposes, car insurance settlements, whether bodily or property, are usually not bothered by the Internal Revenue Service. Bodily injury settlements are most assuredly not taxable.
