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Are lump sum settlements taxable?

Answer #876 -- ( Published 02/13/2013 9:00 AM | Updated 07/12/2017 10:41 AM )

I was involved in an accident and received a lump sum settlement in exchange for signing a waiver freeing the company from future claims. Is this money taxable to the State of Illinois?

The Illinois tax treatment of the settlement follows the federal treatment. If the settlement is subject to federal income tax, it is taxed by Illinois. If it is exempt from federal taxation, it is not taxed by Illinois.

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