by John Darer® CLU ChFC MSSC CeFT RSP CLTC Updated March 20, 2026
Structured Settlement Payments ARE viewed as income
However, structured settlement payments are exempt from income taxes for certain types of damages
- The definition of income is found at Section 61(a) of the United States Internal Revenue Code which reads “Except as otherwise provided in this subtitle, gross income means all income from whatever source derived”
- Structured settlements are primarily used to pay damages for personal physical injury, or physical sickness, wrongful death, or claims pursuant a workers compensation statute. IRC 104(a)(2) and IRC 104(a)(1) provide exemptions for income paid that possesses such characteristics
- IRC 139F exempts certain amounts received by wrongfully incarcerated indivdiuals. See 26 U.S. Code § 139F – Certain amounts received by wrongfully incarcerated individuals | U.S. Code | US Law | LII / Legal Information Institute
Structured settlement payments that representing payment of taxable damages are nuanced. Some types of damages are fully taxable when received
Taxable structured settlements, also known as non qualified structured settlements, benefit plaintiffs in employment settlements, as well as attorneys who structure their legal fees, by way of tax deferral.
Payments from certain types of non qualified structured settlements may have income elements that are taxable but subject to offsets.
Related Reading
Structured Settlements | Tax Benefits of Structured Settlements
What are Non Qualified Structured Settlements and Non Qualified Assignments for Tax Deferral
Construction Defect Structured Settlements
Intellectual Property and Structured Settlements Explained – Structured Settlements 4Real®Blog 2026
Last updated March 20, 2026
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