Robert W. Wood

Legal settlements involve taxes, and understandably, most plaintiffs hope that their settlement proceeds are tax-free. Compensatory damages for personal physical injuries are generally tax-free, but punitive damages and interest are always taxable. The specific wording of the settlement agreement is important, and poor wording can result in the entire settlement being treated as 100% taxable by the IRS. Good settlement agreement language can make the difference between a good and bad tax result.

7 Min Read In Brief Litigation funding was once mainly used by an individual plaintiff for a single case, but law firms now use it heavily, often for portfolios of cases, which allows funders to spread risk.

The Senate has followed the House in passing H.R. 5366 to extend the federal tax exclusion for wildfire recovery payments. It extends the Federal Disaster Tax Relief Act of 2023 that expired on December 31 2025, now applying the exclusion to payments for wildfires declared before January 1, 2027, irrespective of the payment date. The new law creates Section 139M in the tax code and aims to relieve pressure on survivors by making the disaster declaration date, not payment receipt, the qualifying factor for tax years after 2024. While ambiguities persist regarding insurance payments and the tax treatment of non-individual entities, the President is widely expected to sign the bipartisan bill into law.

Sales of legal claims and borrowing on claims are common, and they face different tax rules. Read the documents carefully and consider tax reporting rules.

These ten tax rules are simple, but they can save you money on your taxes, and can keep you out of harms way with the IRS.

Trusts can avoid probate and publicity, and make sure assets are protected. Trusts can save taxes too, but some plans go too far and can even draw criminal charges.

In Brief The Helms-Burton Act created a mechanism for people and companies whose property was confiscated by the Cuban government that took

Most married couples file taxes jointly, but should they? There are numerous reasons that separate tax filings can be safer, depending on the situation of both spouses.

Taxes on lawsuits often hinge on what the settlement agreement says. Try to get explicit wording about taxes, and make sure the defendant signs the agreement.

California's billionaire tax may impact only 200 people. But could it's reach be much further, impacting tax compliance and audits? Will other taxes follow?