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How Are Mesothelioma Settlements Taxed?

Mesothelioma settlements are not usually taxed, according to rules established by the Internal Revenue Service (IRS). A skilled asbestos lawyer can help determine if your mesothelioma settlement could be taxable for any reason. Mesothelioma Hope can connect you with top lawyers who can help you secure a settlement without having to pay taxes.

Legally reviewed by: Melissa Crowe Schopfer

Last updated:

Are Mesothelioma Settlements Taxable?

A man and a woman speaking with a lawyer about mesothelioma taxable settlements.

Mesothelioma and asbestos settlements are typically not considered taxable income.

The IRS doesn’t tax any mesothelioma settlement amounts awarded for physical injuries or illnesses like mesothelioma.

However, compensation from punitive damages sometimes awarded in verdicts to punish those who caused harm is taxable. That said, almost all mesothelioma lawsuits reach settlements, so punitive damages are seldom an issue.

To learn how much of your mesothelioma compensation (if any) could be taxed, work with a skilled asbestos lawyer. The best lawyers can secure a substantial payout on your behalf and explain whether or not it will be taxed.

Look no further than our legal partners at Simmons Hanly Conroy — one of the best mesothelioma law firms in the nation — for help with your case.

The firm’s lawyers have recovered over $9.4 billion for mesothelioma victims and can see if your potential mesothelioma settlement will be taxable. Get a free legal consultation to learn how Simmons Hanly Conroy may be able to help you and your family members.

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Shara Fisher
Shara Fisher Senior Paralegal
17+ years providing legal help to mesothelioma victims

Non-Taxable Mesothelioma Compensation

Generally speaking, any settlement money awarded to cover your expenses or emotional suffering after a mesothelioma diagnosis (compensatory damages) won’t be taxed.

Below, learn more about which aspects of a mesothelioma settlement aren’t taxable.

Personal Injury and Wrongful Death Settlements

According to section 104 of the Internal Revenue Code (IRC), any compensation you receive for an injury or illness isn’t taxed. This means when you reach a personal injury mesothelioma settlement, the money you receive will be tax-free.

Similarly, if you file a wrongful death lawsuit and reach a settlement, the money you get is also tax-free, since it’s awarded to cover funeral costs and other expenses that stem from your loved one’s passing.

Medical Expenses

Mesothelioma settlement compensation for medical bills is generally not taxed, according to section 104 of the IRC.

Did You Know?

Treating mesothelioma can easily cost more than $500,000, so most mesothelioma lawyers will pursue non-taxable compensation to cover as much of these expenses as possible.

However, if you deduct medical expenses on your tax return before receiving a settlement, you may have to pay taxes when your lawsuit settles.

Lost Wages

Mesothelioma is a devastating illness, so you may have to stop working to focus on your health. Mesothelioma settlement payouts often include money to repay lost wages.

The IRS does not tax settlement awards for lost wages.

Emotional Suffering

Mesothelioma is very aggressive and can affect people both physically and emotionally. Because of how this cancer impacts patients and their families, a mesothelioma lawsuit settlement may include compensation for emotional suffering as well as medical expenses.

The IRS notes that settlement compensation for emotional distress is not taxable.

Need help finding a lawyer who can determine if your potential mesothelioma settlement will be taxable? Download our Free Attorney Checklist to find the best lawyers for your case.

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Taxable Mesothelioma Compensation

The IRS typically taxes any punitive damages (money to punish those who harmed you) awarded in a trial verdict. You may also have to pay taxes on any interest earned while your settlement is being negotiated.

Tax regulations on legal fees also affect how much you have to pay. Learn how and why your mesothelioma settlement or verdict could be taxed below.

Punitive Damages

If a mesothelioma lawsuit goes to trial and the asbestos companies being sued are found at fault, a judge or jury could force them to pay punitive damages for harming you.

Any punitive damages you receive could be taxable, according to the IRS. However, punitive damages are very rare since they’re awarded only through trials — and over 99% of mesothelioma lawsuits end in a settlement.

However, if a state law specifies that someone can only receive punitive damages (instead of compensatory damages) in a wrongful death lawsuit, they won’t be taxed.

Interest on Settlement Awards

It may be possible to earn interest on a mesothelioma settlement award. The IRS notes that this is considered “interest income” and is subject to taxes.

However, it’s rare for an average mesothelioma settlement to earn interest, so in most cases, you won’t have to worry about paying this type of tax.

Speak to a mesothelioma lawyer to learn more about how any interest your settlement has generated could be taxed.

Attorney Fees

The best mesothelioma lawyers don’t charge any upfront fees. Instead, they work on a contingency basis and take a percentage of the financial compensation they secure for you at the end of the case.

However, as of 2024, if you receive taxable damages, you will be required to pay taxes on the portion of your settlement your lawyer keeps as their fee.

As most compensation from mesothelioma claims is non-taxable, you likely won’t have to worry about this issue.

Before agreeing to work with a mesothelioma lawyer, ask them how they’ll charge and how their fees could impact your taxes. Explore your legal options now with a free consultation.

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Shara Fisher
Shara Fisher Senior Paralegal
17+ years providing legal help to mesothelioma victims

Factors Affecting Taxes on Mesothelioma Settlements

Many other factors can affect if and how a mesothelioma lawsuit settlement or jury verdict could be taxed.

These factors include:

  • Legal jurisdiction: Some legal jurisdictions are more favorable to mesothelioma victims than others. Lawyers at top mesothelioma law firms can select the best jurisdiction in which to file your case and work to get the highest payout that will be subjected to the least amount of taxes.
  • Settlement agreements between lawyers: Your lawyers can work with the asbestos companies’ lawyers to avoid taxes when negotiating a settlement. For example, your legal team can make sure you don’t get a 1099 tax form (used to report income other than wages) after receiving a settlement, according to a Forbes report.
  • State/local income tax laws: You may need to pay state or local income tax in addition to federal income tax. As of 2024, 43 states and the District of Columbia require residents to pay personal income tax, but the other 7 do not. Local laws also affect how much income tax must be paid to your city, town, or county.
  • Tax code changes: Tax codes are always subject to change. Consult with a lawyer or tax professional to find out how any recent tax code changes could affect your mesothelioma lawsuit payout.

A top mesothelioma lawyer can see if any factors could affect your settlement and how it’s taxed. Use our Free Attorney Checklist to find the best lawyer for your case.

Taxation for Other Types of Mesothelioma Compensation

You may be able to secure mesothelioma compensation from other sources besides settlements. These other forms of compensation may or may not be subject to taxes.

Learn about different types of mesothelioma compensation and if they can be taxed below.

Asbestos Trust Fund Claims

Asbestos trust funds were set up by bankrupt asbestos companies to avoid lawsuits. More than $30 billion is available in asbestos trusts as of May 2024.

A qualified asbestos attorney may be able to file asbestos trust fund claims on your behalf to secure compensation.

Payouts from asbestos trust funds are not taxed under section 104 of the IRC, as the money is intended to cover expenses related to your mesothelioma diagnosis.

VA Benefits Claims

U.S. veterans with mesothelioma can file for financial benefits with the U.S. Department of Veterans Affairs (VA).

As of 2024, many financial VA benefits, including VA disability compensation, pensions, and payouts for survivors, are not taxed.

Workers’ Compensation Claims

Money from workers’ compensation (insurance that provides money to workers who get injured or sick on the job) isn’t taxed.

However, a lawsuit usually awards mesothelioma patients much more than a workers’ compensation claim, even if taxes are taken out. Because of this, it’s typically not in a victim’s best interest to file a workers’ compensation claim for mesothelioma.

An asbestos lawyer can see which forms of mesothelioma compensation will be best for your case and work to make sure they won’t be subject to taxes. Get started with a free legal consultation right now.

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  • Over $30 billion available
  • No cost to file a claim
  • Avoid going to court

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Shara Fisher
Shara Fisher Senior Paralegal
17+ years providing legal help to mesothelioma victims

Get Tax Answers From a Mesothelioma Attorney

A mesothelioma attorney can help you avoid any tax issues and secure the most money from a settlement or verdict in your case.

Experienced mesothelioma attorneys can:

  • Advise you on federal, state, and local tax laws that could affect your payout
  • Access databases of past cases to build and support your claim
  • File lawsuits correctly and within the appropriate legal deadline
  • Secure a strong settlement or take your case to trial if needed

Get a free legal consultation today or call (866) 608-8933 to learn how an attorney can help you reach a tax-free mesothelioma settlement.

Mesothelioma Settlement Taxation FAQs

Is money from a mesothelioma settlement taxable?

You will most likely not have to pay taxes on a mesothelioma settlement.

According to section 104 of the IRS tax code, money you receive through a settlement or verdict that covers expenses related to your illness can’t be taxed.

You may have to pay taxes on any punitive damages you get (extra money awarded to punish asbestos companies for harming you).

However, these damages are only awarded in trial verdicts, which are extremely rare since nearly all mesothelioma cases settle out of court.

You may also have to pay taxes on any interest you make on a settlement during the negotiation process, but this is also rare.

Are asbestos lawsuit settlements taxable?

You may qualify to file a lawsuit and secure a settlement if you have an asbestos-related disease such as lung cancer, asbestosis, or mesothelioma. These asbestos settlements are typically not taxable.

Punitive damages from trial verdicts or interest that you earn on settlements could be taxed, however.

Do I have to report settlement money to the IRS?

No, you may not need to report mesothelioma settlement money to the IRS when filing your taxes if all the money you received was nontaxable.

However, you should check with an experienced attorney before filing your taxes to confirm that your mesothelioma settlement isn’t taxable.

What settlement proceeds are not taxable?

Almost all types of legal mesothelioma settlements aren’t taxable, but it depends on why you were awarded compensation.

Most people who receive mesothelioma settlements don’t have to pay taxes since the money is awarded exclusively to cover medical expenses related to their diagnosis.

How much of a settlement is taxable?

In many cases, mesothelioma settlements aren’t taxable at all if they’re awarded solely for your illness. The only time your settlement could be taxed is if you earn interest on it while it’s being negotiated by your attorney.

You must pay taxes if you’re awarded punitive damages in a trial verdict. There may also be taxes on attorney fees if your case goes to trial.

However, over 99% of asbestos claims reach out-of-court settlements, so it’s unlikely that any money you receive from a lawsuit will be taxed.

Call (866) 608-8933 to connect with a lawyer who can help you pursue mesothelioma settlements that aren’t taxable.

Attorney Melissa Crowe SchopferReviewed by:Melissa Crowe Schopfer

Partner, Simmons Hanly Conroy

  • Fact-Checked
  • Legal Editor

Melissa Crowe Schopfer is a partner at Simmons Hanly Conroy. Over the past 10 years, Melissa has worked on over 500 cases and recovered more than $100 million in settlements and trial verdicts on behalf of her clients. She has represented families impacted by mesothelioma and asbestos-related diseases in almost every state.

  • Asbestos Trial Team Leader
  • Practicing Attorney for 15+ Years
  • Has Recovered Over $100 Million
Laura WrightWritten by:

Lead Editor

Laura Wright is a journalist and content strategist with more than 15 years of professional experience. She attended college at the University of Florida, graduating magna cum laude with a bachelor’s degree in journalism in 2008. Her writing has been featured in The Gainesville Sun and other regional publications throughout Florida.

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  1. American Bar Association. (2022, March 31). Tax Write Off of Legal Fees Simplified. Retrieved May 8, 2024, from
  2. Internal Revenue Service (n.d.). Settlements—Taxability. Retrieved May 8, 2024, from
  3. Internal Revenue Service. (2023, October 16). Tax Implications of Settlements and Judgments. Retrieved May 8, 2024, from
  4. Kassraie, A. (2023, February 6). In tax season, how can Veterans maximize their tax benefits? Retrieved May 8, 2024, from
  5. Legal Information Institute. (n.d.). Punitive damages. Retrieved May 8, 2024, from
  6. Shechtman, D. (n.d.). Tax Aspects of Litigation Awards and Settlements. Retrieved May 8, 2024, from
  7. Wood, R. (2021, October 19). IRS Tax On Legal Settlements Depends On Wording. Retrieved May 8, 2024, from
  8. Wood, R. (2017, April 27). Ten Rules Every Lawyer—and Client—Should Know about Taxes on Legal Settlements. Retrieved May 8, 2024, from
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