I often get asked if personal injury settlements are taxable. The answer is generally no. It’s not considered income, so it’s not something that has to be reported on either state or federal taxes. In certain situations, it may become taxable, but there are ways to prevent that. Oftentimes, if a confidentiality clause is included within a release, there’s some tax consequence to it, but often they can be minimized or taken away completely with proper wording in that release.