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What makes a structured settlement tax free?

April 26, 2017Free structured tax

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What makes a structured settlement tax free?

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The Internal Revenue Code makes structures tax-free for those with physical injuries. (Click here to see Tax Codes) A structured settlements principal and interest are entirely tax free. Even though a traditional lump-sum cash settlement is free of income taxes, any interest earned on the settlement funds is subject to Federal, state and local taxes. (Click here to see the Taxable Equivalency Table) Thus, structured settlements were developed to create a more stable financial basis for the injured party.