Pre-settlement funding can be a powerful tool for plaintiffs facing financial hardship during litigation. But as with any financial transaction, it’s natural to wonder: Will I owe taxes on the money I receive? Will funding affect my settlement or trigger IRS issues?

This article breaks down the tax implications of pre-settlement funding, clarifies common misconceptions, and explains how Instabridge structures its advances to protect your financial peace of mind.

Is Pre-Settlement Funding Considered Taxable Income?

The good news for most plaintiffs is this: pre-settlement funding is generally not considered taxable income. Why?

Because it’s not a paycheck or loan in the traditional sense—it’s a non-recourse advance. That means:

• You don’t pay income tax when you receive the funding.

• You’re not responsible for repayment unless your case wins or settles.

• If you lose your case, you owe nothing—and still won’t face tax consequences.

Since the advance is tied to the future value of your lawsuit—not your employment or earnings—it’s not treated like taxable income by the IRS in most cases.

What About Taxes on the Final Settlement?

While pre-settlement funding itself is usually not taxable, your settlement or judgment may have tax implications, depending on the nature of your case. Here’s a basic breakdown:

Always consult a tax professional to assess your individual case, especially if your settlement involves multiple components.

Does Repaying a Funding Advance Trigger Taxes?

When you repay your pre-settlement advance from your final settlement, there are no additional taxes triggered by the repayment itself.

However, if part of your settlement is considered taxable (e.g., wages or interest), that portion will still be taxed regardless of whether some of it goes toward repaying your advance.

Common Myths About Tax and Funding

❌ “I’ll have to report the funding as income.”

✔️ False. It’s not income; it’s an advance based on your future recovery.

❌ “I can write off my repayment as a deduction.”

✔️ Unlikely. Since pre-settlement funding isn't treated like a loan, the repayment typically doesn’t qualify for tax deductions.

❌ “If I lose my case, I’ll still owe taxes on the advance.”

✔️ Not true. If your case is unsuccessful, you owe nothing—and the IRS won’t consider the advance taxable.

How Instabridge Ensures Tax-Safe Funding

At Instabridge, we’re committed to protecting your financial well-being from start to finish. That’s why our pre-settlement advances are:

• Non-recourse — you only repay if you win or settle

• Structured clearly — with no hidden tax surprises

• Designed for peace of mind — with full transparency and no fine print

While we always recommend consulting a CPA or tax advisor for case-specific questions, our funding structure aligns with standard IRS treatment of personal injury settlements.

Conclusion: Focus on Your Case—Not the IRS

Pre-settlement funding from Instabridge gives you immediate financial relief without the stress of tax consequences. In most cases, your advance is not taxable, and repayment comes only if your case is successful—keeping your focus where it belongs: on healing and securing justice.

Have questions about pre-settlement funding or how it may affect your financial picture? Contact Instabridge today and speak with our knowledgeable team. We’re here to support your case and your future—every step of the way.