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Tax Benefits of a Structured Settlement

Tax Benefits of a Structured Settlement

One of the most well-known benefits of receiving a structured settlement is the tax benefits. Almost all structured settlement payments are considered tax free. Therefore, when you receive the payments, they are not considered part of your income and therefore not taxed. You do not have to pay any taxes on payments received as a result of a structured settlement. Likewise, if you decide to sell all or a portion of your structured settlement payments, the amount you receive in exchange for those payments should also be tax free. It is important to know that the payments must be transferred in accordance with the Federal and State Structured Settlement Transfer Act in order to qualify for the tax exemption. Due to this, it is important that you work with a trusted and well rated structured settlement purchasing company so that you can ensure your transfer is completed legally. Otherwise, you could be facing up to a 40% tax on the amount you receive.
If you ever have questions about the tax status of your payments you can always research online, contact the company that actually structured your payments or call a structured settlement buying company and ask that they explain it to you. In doing so, they should explain to you how you can avoid the excise tax of 40% if the Federal and State Structured Settlement Transfer Acts are followed. Any company who is unable to explain this or does not understand this is not a company you should be working with! It could result in a significant loss to you.

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