Q: I’m a Canadian citizen who was injured in an auto accident in the U.S. If I receive a lump-sum payment or a structured settlement, will I be taxed by the Canadian government?—David Parker
A: I’m sure your accident and recovery have been painful enough. I’m happy to say that there won’t be additional tax “pain” to add to what you’ve already suffered.
While they are exceptions, money received for personal injury damages is not taxed in Canada. According to Canada Revenue Agency spokesperson Jennifer McCabe, the question is “whether the amount is in respect of damages or can reasonably be considered to be income.” You can read up on the details by searching the CRA website for “IT-365R2,” but in your case the payout wouldn’t be considered income.
Bruce Sellery is a frequent guest on financial television shows and author of Moolala. Do you have your own personal finance question? Write to us at firstname.lastname@example.org