If you receive a monetary award for damages as the result of a personal injury, be it physical or mental, that award is generally tax-free. For example, a car accident victim may receive damages for personal injury including the reimbursement of various out-of-pocket expenses, such as uninsured medical and hospital expenses, as well as general damages compensating the injured party for pain and suffering, the loss of amenities of life, and loss of future earning capacity. The general rule is...

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