Do Structured Settlements Count as Income?

Structured settlement payments are not considered income for tax purposes, even when the structured settlement accrues interest over time. This makes them an ideal form of proof of income for mortgage lenders, as they are more reliable than some jobs and won't be affected by changes in the economy. The Supreme Court has ruled that amounts received in resolving a claim for late payment and liquidated damages under the Age Discrimination in Employment Act do not qualify for §104 (a) (exclusion).Structured settlement annuities are treated as income annuities, and inheritance is handled in the same way. Structured settlement brokers (a special type of insurance agent) are consulted when a case is approaching liquidation.

If the state uses the equitable distribution method and the agreement was obtained before marriage, the agreement will usually stay with the owner. The same applies to lump sums received from selling structured settlement payments and investing them in stocks, real estate, or other investments. Congress passed the Recurring Payment Settlement Act of 1982 to encourage the use of structured settlements in cases of physical injury and wrongful death. Section 130 of the Internal Revenue Code exempts certain income from personal injury settlements from income tax. Minors cannot control their settlement payments, so parents are in charge. If you can buy a home in one go, pay all fees and taxes upfront, and support yourself without structured settlement, this is something to consider.

Customers who choose a structured settlement annuity don't have to worry about reporting any future annuity payments as income in the year they are received. Structured settlements can be sold, but there is no standard formula for doing so. Some agreements also include a commutation clause that allows inherited annuities to be paid in a single payment. Injured parties will never pay taxes on structured settlement money awarded in these cases, regardless of whether they receive it as a series of payments or sell it for a lump sum. Payments may increase or decrease several times in the future.