05 Jun My husband got a settlement. Does it count as PAS-1 income?

Q. My husband received a malpractice settlement. Does this amount have to be listed on the PAS-1 application as income?
— Retired

A. Malpractice, wow. We hope your husband is doing well.

The PAS-1 application covers the Senior Freeze, ANCHOR and the Stay NJ benefit.

Taxpayers who are eligible for the relief no longer are required to file separate applications for these state-based programs for tax relief, said Alana Lightenberg, an attorney at Wells, Jaworski & Liebman, LLP, in Paramus.

When completing the PAS-1, on page 3, when answering the inquiries as to income earned in the tax year, the settlement award from your husband’s malpractice settlement may be reportable income if the award reflects damages for lost earnings, Lightenberg said.

“If the settlement proceeds reflect awards for injuries or sickness, under 26 U.S.C. § 104, Compensation for Injuries or Sickness, then gross income generally does not include: (i) amounts for worker’s compensation for personal injuries or sickness; (ii) the amounts of damages received as result of a lawsuit or settlement agreement for personal physical injuries or physical sickness, except for punitive damages; and (iii) amounts received as result of an accident or health insurance provider for physical injuries or sickness with the exception to amounts the employee received that are result of employer contributions and not includible in gross income, or are paid by the employer,” she said.

She recommends you consult with your accountant and your personal injury attorney to confirm how the awarded amount from the malpractice settlement is structured to best determine if it is reportable income.

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This story was originally published in June 2026. 

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