Exclusions from Gross Income (Generally)

Personal injury recoveries and workers’ compensation covered injuries

Under Section 104, payments for personal injuries and sickness are generally excluded from gross income. Since 1996, the damages must be for personal physical injuries or personal physical sickness.  The IRS generally requires that an overt manifestation of physical injuries and “observable bodily harm” exist for an exclusion to be available. In a 2008 ruling, the IRS assumed that there were personal physical injuries from sexual molestation. It is not very clear what constitutes a physical sickness vs. a physical injury.  The commentary “Tax-Free Physical Sickness Recoveries in 2010 and Beyond” in the Tax Practice publication (Volume 67, No. 9 of August 30, 2010) discusses this topic.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: