How the take-home amount is calculated
Your take-home is the gross settlement minus the attorney’s fee, minus case costs the lawyer advanced, minus liens that must be repaid from the settlement. The fee percentage is set by your written fee agreement; the costs and liens appear on the settlement statement the lawyer must give you before you sign.
| Line | 33.3% fee | 40% fee |
|---|---|---|
| Gross settlement | $50,000 | $50,000 |
| Attorney fee | −$16,665 | −$20,000 |
| Case costs (records, filing, experts) | −$1,500 | −$1,500 |
| Medical liens and reimbursement | −$6,000 | −$6,000 |
| You receive | $25,835 | $22,500 |
Ask whether the fee is taken before or after costs: on the same $50,000, taking 33.3% after subtracting $1,500 of costs saves you about $500. Many agreements also raise the percentage at trial or appeal.
Take-home at common settlement sizes
| Gross settlement | Settled before suit | Settled after suit |
|---|---|---|
| $10,000 | $5,367 | $4,500 |
| $25,000 | $13,418 | $11,250 |
| $50,000 | $26,835 | $22,500 |
| $100,000 | $53,670 | $45,000 |
| $250,000 | $134,175 | $112,500 |
Medical liens: who gets paid back
Health insurers, Medicare, Medicaid, hospitals and workers’ compensation carriers that paid for your injury treatment often have a legal right to be repaid from the settlement. Medicare’s right is federal and must be resolved before funds are released. Lawyers routinely negotiate liens down, and many state laws reduce a lien by the share of attorney fees the insurer benefited from; ask for the final lien amounts in writing before you sign the release.
Settlement tax calculator: what the IRS taxes
Damages received on account of personal physical injuries or physical sickness are excluded from income, whether paid as a lump sum or in installments.[1] The IRS explains how other parts are treated:[2]
- Not taxable: compensation for physical injuries and sickness, including the related medical bills, lost wages and pain and suffering in a physical injury case.
- Taxable: punitive damages; interest on the settlement or judgment; emotional distress damages not caused by a physical injury (except amounts that pay medical bills for that distress); back pay and front pay in employment cases (which are wages).
- Allocation matters: how the settlement agreement allocates the money between categories affects the tax result, and the IRS looks at what the payment was really for.
This is general information, not tax advice; a tax professional should review a large or mixed settlement.
From offer to a realistic settlement
A first offer is usually low. A realistic settlement range starts from the full value of the claim (see the personal injury settlement calculator or the car accident settlement calculator), discounted for disputes about fault and the at-fault party’s insurance limits, then reduced by the deductions above. Mediation often lands between the parties’ last positions. If a deadline is approaching, filing suit preserves the claim: check the statute of limitations by state.