Amounts paid for emotional distress as a result of a physical injury are tax-free. This is an important bit of knowledge for anyone going through domestic violence or that has had an accident. As well, reimbursements for medical treatments arising from emotional trauma are also tax-free. This means if you are a victim of domestic violence or have had an accident (or something bad happen) and you go to see a therapist for your issues, the monies reimbursed from your insurance for that is TAX FREE.
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