Me, my wife, and my 10 year old daughter were driving and were hit by a negligent driver. The driver got a ticket and has been proven to be at fault. I had leg and arm injuries and have been out of work for 4 months (will be returning in September). Wife had leg and back injuries, is already back to work. Daughter got seatbelt burns and bruises (thank God that's all she got). Anyway, we have a lawyer working on it and it looks like there will be a settlement made as there has been a tentative agreement with their insurance company.

With all that said, do I have to pay taxes on the settlement money?

Settlement for injury is not taxable. If it is for lost wages or interest, it is taxable. Settlement for emotional or physical distress is taxable. Attorneys fees are deductible if they are an attempt to get you taxable income otherwise they are not deductible.

Thanks for the help!

So the settlement is to include time lost from work plus the physical injuries we received from the driver. Does the part that's for lost wages become taxable and the rest is not? And, does that mean it gets paid for when I collect the money or at tax time I get a form?