Are Mesothelioma Settlements Taxable?

An older couple looks over documents at their table

The average mesothelioma settlement awards between $1 Million and $1.4 Million to provide financial relief to families impacted by this devastating disease — but how much of that has to be paid in taxes?

Mesothelioma compensation is generally not considered taxable income because it results from a personal injury. However, there are some exceptions, particularly with punitive damages in jury verdicts.

“The key question to ask is: ‘What was the settlement […] intended to replace?’”
– Internal Revenue Service (IRS)

If you or a loved one has been diagnosed with mesothelioma, Sokolove Law may be able to help you get the most compensation possible from your claim. Get started now with a free consultation.

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Is a Mesothelioma Settlement Taxable?

Mesothelioma settlements may or may not be taxable depending on what the money is awarded for. Within your settlement amount, there are various types of damages that each have their own tax requirements.

The IRS requires U.S. residents or citizens to pay taxes on their gross income, which includes wages, profits from investments, and all other forms of income.

However, compensation from a mesothelioma lawsuit “on account of personal physical injuries or physical sickness” is not considered gross income, according to IRS tax code 104 (a)(2). This often includes elements like compensatory damages and medical bills.

Compensation that doesn’t directly address a personal injury, like punitive damages and interest, may require you to pay taxes.

Find out more about what’s taxed in a mesothelioma settlement and what’s not below.

Non-Taxable Mesothelioma Settlement Compensation

While some portions of a settlement may be taxable, there are specific types of compensation that are generally considered non-taxable by the IRS.

At Sokolove Law, our asbestos attorneys fight to maximize your potential mesothelioma settlement by securing compensation from every area that applies to your case.

Compensatory Damages

Compensatory damages, also known as “actual damages,” are intended to pay mesothelioma patients for the harm they’ve suffered.

This type of compensation may take into account: 

  • A patient’s loss of income from being unable to work
  • Any expenses directly related to their illness
  • Emotional distress caused by a mesothelioma diagnosis

These damages may be awarded through a personal injury or wrongful death lawsuit, and since they seek to pay victims for a physical injury or illness, they’re typically not subject to taxes by the IRS.

In one mesothelioma case that went to court, the jury awarded our U.S. Navy veteran over $40 Million in compensatory damages against the defendant, Goodyear. Our client’s diagnosis completely changed his previously active lifestyle.

"I want people out there to realize that there’s help, and they can get assistance and a mesothelioma settlement from these manufacturers that continue to use asbestos while knowing it’s dangerous for people."
– Dee, Wife of a Mesothelioma Patient & Firm Client

Medical Bills

Medical treatment for mesothelioma can quickly add up to over $400,000 a year, and insurance may not cover all related expenses.

Settling a mesothelioma claim can help you get compensation for medical bills like:

  • In-home care, like visiting nurses and respite workers
  • Treatments, like surgery, chemotherapy, and radiation
  • Palliative care to ease symptoms and keep patients comfortable
  • Traveling to see mesothelioma specialists

You don’t have to pay taxes on any portion of a settlement awarded for your past, current, or future medical costs.

Our asbestos attorneys can estimate the total cost of all current and future medical expenses linked to mesothelioma, so you can get the compensation you need to fight this disease.

Lost Wages

If you’re unable to work due to mesothelioma, you may be awarded additional payment for lost wages. Mesothelioma compensation for lost wages is not taxable.

Compensation for wages is excluded from your gross income if “a personal physical injury caused such a loss,” according to the IRS.

The financial burden of mesothelioma can add up quickly, especially when you’re not earning an income. Getting legal help for mesothelioma can allow you to secure your family’s financial situation during this difficult time.

“I called my union rep and told him, ‘I’ve been told I can’t work again, I have mesothelioma.’ And he said to me, ‘Did you call that number on TV? They help victims like yourself get benefits.’ In two days, the lawyers were at my house.”
– Dennis, Mesothelioma Patient & Firm Client

Burial Expenses

Losing a loved one to mesothelioma is emotionally devastating and can bring about even more unexpected financial burdens. Burial expenses, which include funeral costs and cemetery fees, can add up quickly and reach thousands of dollars.

Filing an asbestos claim after the death of your loved one may allow your family to secure justice on their behalf and compensation that can help pay for their funeral.

Damages awarded from a wrongful death lawsuit are not taxable by the IRS. This includes money awarded to help pay for burial expenses.

Call (800) 647-3434 now for free help determining your eligibility to file an asbestos claim after your loved one's death.

Taxable Asbestos Settlement Payouts

While the primary purpose of mesothelioma compensation is to provide financial support for medical treatment, lost income, and other related costs, any additional funds awarded may be subject to taxation by the IRS.

Understanding which parts of your mesothelioma settlement may be taxable is key to ensuring you correctly report your income to the IRS.

Punitive Damages

If your case goes to trial, a judge or jury may award you punitive damages as part of your mesothelioma verdict. Punitive damages “are always taxable, even if your injuries are 100 percent physical,” according to the American Bar Association.

This form of compensation is intended to punish asbestos-related companies that knowingly put people in harm’s way or acted recklessly.

“We filed a mesothelioma lawsuit to hold companies accountable. I don’t know how these people slept at night, knowing people were being exposed to asbestos. They need to pay anyone that’s been affected by this.”
– John, Mesothelioma Survivor & Firm Client

Punitive damages made up 52% of the compensation awarded in 2019 mesothelioma trial verdicts where permitted, according to National Economic Research Associates.

Compensation from punitive damages should be reported as “other income” when filing your taxes.


While a mesothelioma settlement is being processed, any interest that may accumulate on this settlement is considered taxable.

The IRS notes that “interest on any settlement is generally taxable” and should be included in your taxable income.

There are two types of interest: 

  • Pre-judgment interest begins to accumulate when your lawsuit is filed up until a settlement amount is reached.
  • Post-judgment interest can then build upon these damages from the time the settlement is determined until it’s actually paid out.

Interest rates and how they’re calculated may vary depending on the state where your lawsuit is filed.

Taxes on Other Types of Mesothelioma Compensation

Filing a lawsuit isn’t the only way to get compensation for mesothelioma and seek justice for your illness. In some cases, you may be able to secure compensation from a lawsuit, trust fund claims, and benefits from the VA.

Find out more about taxes on these other types of mesothelioma compensation below.

Asbestos Trust Funds

Asbestos-related companies that filed for bankruptcy were ordered to put compensation in trust funds for current and future mesothelioma victims.

An estimated $30 Billion is still available in asbestos trust funds for mesothelioma patients and their families.

Similarly to compensatory damages, trust fund payments are not taxable since they are considered compensation for personal injuries.

At Sokolove Law, we can help you pursue compensation from all of the trust funds you qualify for — often from the comfort of your own home.

VA Benefits for Mesothelioma

Veterans with mesothelioma and their loved ones may be eligible for tax-free payments from the VA in addition to other benefits.

Benefits for veterans with mesothelioma include:

  • Aid and Attendance (A&A)
  • Disability Compensation
  • Health Care
  • Housebound Benefits
  • Special Monthly Compensation (SMC)
  • VA Pensions

Due to the severity of this cancer, the VA awards veterans with mesothelioma a 100% disability rating, making them eligible for the most compensation possible.

This disability rating allows veterans with mesothelioma to receive $3,737.85 a month. More compensation may be available to veterans with spouses and dependent children.

Let us help you pursue compensation from all of the options you qualify for. Call (800) 647-3434 now for a free, no-obligation case review.

Sokolove Law: Securing Mesothelioma Settlements Nationwide

As an established national asbestos law firm, Sokolove Law can help families across the country pursue mesothelioma settlements.

Over the last 45+ years, we’ve secured more than $5 Billion for mesothelioma patients and their loved ones.

While the mesothelioma payout timeline may vary from case to case, many of our clients start receiving compensation in as few as 90 days of first contacting us.

Call (800) 647-3434 now or fill out our contact form to get started. There’s no cost to speak with us, and our team only gets paid if your case successfully results in compensation.

  1. American Bar Association. “Ten Rules Every Lawyer—and Client—Should Know about Taxes on Legal Settlements.” Retrieved from: Accessed on March 1, 2024.
  2. Cornell Law School. “compensatory damages.” Retrieved from: Accessed on March 1, 2024.
  3. Cornell Law School. “punitive damages.” Retrieved from: Accessed on March 1, 2024.
  4. Internal Revenue Service. “Settlements—Taxability.” Retrieved from: Accessed on March 1, 2024.
  5. Internal Revenue Service. “Tax Implications of Settlements and Judgments.” Retrieved from:,physical%20injury%20caused%20such%20loss. Accessed on March 1, 2024.
  6. National Economic Research Associates (NERA). “The Role of Punitive Damages in Asbestos Litigation.” Retrieved from: Accessed on March 1, 2024.
  7. U.S. House of Representatives. “26 USC 104: Compensation for injuries or sickness.” Retrieved from: Accessed on March 1, 2024.