Personal Finance

Is insurance settlement money taxable?

  • Last Updated:
  • May 20th, 2015 2:31 pm
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Deal Addict
Sep 5, 2010
2352 posts
382 upvotes
Toronto

Is insurance settlement money taxable?

A friend of mine who lives in Ontario was in a serious car accident 1.5 years ago (hit by one car from behind and then another oncoming car)

Not sure about all the details of the settlement, but part of it has been finalized and he got a settlement payment from the insurance company. It is close to $30K. The second case is still pending. He is wondering about the following:

1-Is this $30K taxable? will he have to pay taxes when he files his taxes next year? on the CRA website, it is not very clear, it only talks about death benefits (most amounts received from a life insurance policy following someone's death ;) http://www.cra-arc.gc.ca/tx/ndvdls/tpcs ... d-eng.html

2-At the time of the accident and ever since, he has been on welfare: does he need to let them know and whether they (ODSP) will deduct money from him?
I found the following and not sure if this confirms that they won't deduct money from him as a result of this settlement?

[QUOTE]Proceeds from a court judgement or legal settlement or an award from a statutory tribunal, such as Compensation for Victims of Crime, received as damages or compensation for pain and suffering, due to injury to or the death of a member of the benefit unit, up to a maximum of $100,000 for each member of the benefit unit. See Directive 4.6 Compensation Awards;[/QUOTE] - according to the 'Ontario Disability Support Program - Income Support. Directives. 5.1'


thanks,
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3 replies
Deal Fanatic
User avatar
Jan 31, 2006
8541 posts
2655 upvotes
Toronto
NO, insurance settlement and lottery winning are not taxable. If you put it on bank then only the interest portion is taxable.
Deal Addict
Aug 19, 2013
2397 posts
1091 upvotes
I can't give you an each answer without looking up specific legislation but I think it depends on how the settlement is worded. Damages for things like pain and suffering are not taxable. But payment for lost wages may be. Sorry I don't have time to look it up. But I would start with looking at the terms of the settlement.

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