You may see the term tax-free structured settlement annuity on the Internet, however there is no such thing. The structured settlement annuity does not drive the tax consequences to the Payee.
Damages are sum(s) of money claimed or awarded in compensation for a loss or an injury.
Let's break it down further, together:
IRC 104(a)(1) Workers Compensation
IRC 104(a)(2) Personal physical injury or physical sickness, wrongful death
IRC 139F Wrongful incarceration
Payments from a structured settlement annuity are not tax-free when they represent damages that are not excluded under the Internal Revenue Code. A structured settlement annuity can be used to fund the periodic payments under a non-qualified assignment (also known as anon qualified structured settlement or tax-deferred structured settlement)
Note that at the time of publication structured settlement annuities may be used to fund tax exempt damages using a non-qualified assignment. These include:
Last updated March 30, 2023
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