December 24, 2025
In most cases, no. Money you receive for physical injuries or physical sickness—including medical bills, pain and suffering, and lost wages tied to those injuries—is not taxable under federal or state tax law in either Illinois or Wisconsin.
However, some parts of a settlement can be taxable, including:
- Punitive damages
- Interest added to a judgment or settlement
- Compensation for emotional distress not connected to a physical injury
- Portions of a settlement previously deducted on your taxes (e.g., medical bills you itemized)
Because tax situations vary, we always recommend speaking with a tax professional if you have specific concerns.
