What is the tax treatment of lost wages in a Georgia personal injury settlement?

What is the tax treatment of lost wages in a Georgia personal injury settlement?

Lost wages present a nuanced question. Under Commissioner v. Schleier, 515 U.S. 323 (1995), the Supreme Court held that the exclusion under § 104(a)(2) requires that the payment be (1) damages and (2) received “on account of” personal physical injuries. Where lost wages are paid as part of a global physical injury settlement—not itemized separately—courts and the IRS have generally treated them as excluded. However, if lost wages are separately itemized in the settlement agreement and are not tightly connected to physical injury, they may be taxable. This is another reason why professional allocation of settlement proceeds is critical.