Shocking Fact About Structured Settlement Annuities
A common misconception is that structured settlement annuity payments are not taxable. Because many types of cases are resolved using structured settlements, there are instances where structured settlement annuity payments could be taxable. The fact is that structured settlement annuities have absolutely nothing to do with the taxation of structured settlement annuity payments.
A structured settlement is merely the vessel on which the damages travel to the payee.
The Proof is in the Damages
It is the damages that the annuity payments represent that affects the taxation of the annuity payments.
If the payments represent damages on account of personal physical injury, physical sickness, or wrongful death, then the damages will be tax free, consistent with and within the meaning of IRC Section 104(a)(2)If payments represent workers compensation, then such payments will be tax free , consistent with and within the meaning of IRC 104(a)(1)If the payments represent damages as compensation for wrongful imprisonment, such payments will be tax free, consistent within and within the meaning of IRC 139FIf payments represent taxable damages, then such structured settlement annuity payments will be taxable