Serving Those Who Lost the Most

Investment Guidance for 9/11 Families

Fee-only fiduciary advisory built around USVSST awards, MDL-1570 distributions, and long-term financial security for families navigating one of the most complex financial situations in America.

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Quick Answer

Is my VCF award or USVSST distribution subject to federal income tax?

It depends on the fund and on what the payment is for. VCF awards for physical injury or physical sickness are generally excluded from federal income tax; IRS Publication 3920 lists September 11th Victim Compensation Fund payments among the amounts not included in income. USVSST Fund payments are different. Publication 3920 does not address the USVSST Fund, and the Fund issues no Form 1099 and takes no position on taxability. For a 9/11 family, the part of a USVSST award that compensates for physical injury or death is generally excludable under IRC section 104(a)(2), while portions like punitive damages or interest are generally taxable. Separately, investment income you earn after you invest an award is generally taxable. This is general educational information, not personalized tax advice; always confirm with a qualified tax professional.

The Challenge

Your Financial Situation Is Unlike Any Other

USVSST award recipients and MDL-1570 beneficiaries face financial complexity that most advisors have never encountered, and will never fully understand.

USVSST Fund awards, potential MDL-1570 distributions, charitable gifting strategies, tax treatment of awards: these are not topics covered in standard financial planning curricula. They require specialized expertise.

Sirmium Capital has built its practice around these specific needs. We understand the legal framework, the tax implications, and the long-term capital allocation strategies that protect and grow awards over a lifetime.

What We Help 9/11 Families Navigate

  • USVSST award management and long-term investment structuring
  • MDL-1570 fund distribution coordination
  • Tax-efficient investment strategies for large settlements
  • Charitable giving and legacy planning
  • College funding and generational wealth planning
  • Survivor benefit coordination and income replacement

Free Resource

Get Your Free USVSST Distribution Planning Guide

The step-by-step guide to USVSST and VCF distributions, how the tax questions generally work, the pitfalls that deplete awards, and how to make it last.

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Sirmium Capital LLC is a registered investment adviser. Educational purposes only. Not personalized financial advice.

What's Inside:

  • How the tax questions work, and why there is no blanket answer
  • Where awards quietly get depleted, including means-tested benefits
  • The two programs, the caps, the 30 percent rule, and the 15 percent fee cap

Free Tool

What's Left: The USVSST
Payout Math

Walk a hypothetical judgment through the Fund's five pro-rata steps and the 15 percent fee cap. It is the mechanics, in plain numbers.

An illustration of the mechanics on the number you enter. Not a prediction of your payment, not your award, and not legal or tax advice. Your eligibility, caps, offsets, fee, timing, and tax character are for your USVSST/VCF counsel and CPA.

A hypothetical judgment
$
A what-if figure from a court judgment. By statute, compensatory damages exclude pre- or post-judgment interest and punitive damages. This is not a lookup of your judgment.
Defaults to 1.64%, the percentage paid to 9/11-related claimants in the sixth distribution. Each round is different: the sixth distributed $2.825 billion, while the Fund's remaining balance as of June 30, 2026 was $299.3 million. No seventh-round percentage has been published, and by law nobody can predict one. Change this to see how the mechanics move.
$
Two effects, following the Fund's own published Round 6 methodology: amounts not already deducted in an earlier round are subtracted from the round payment, and at 30% or more of your claim nothing is paid this round until other claimants catch up. A VCF award is NOT counted here (life-insurance and Defense Base Act benefits are reported but also not counted). Enter 0 if none.
The steps, plus the fee cap
1. Gross compensatory damages$30,000,000
2. After the $20M individual capDamages above $20M are treated as $20M.$20,000,000
3. Pro-rata round paymentAt the percentage you entered. Not a prediction of your round.$328,000
4. Other-source compensation, and the 30% testOther sources are 0.7% of the claim, below 30%. Amounts not already deducted in an earlier round come out of the round payment; anything left over carries to future rounds.-$200,000
Maximum attorney fee (15% cap)The most an attorney may charge on a 9/11-related claim.-$19,200
Illustrative net$108,800

The family caps are not in this walkthrough on purpose. The Act caps a group, not a person: $35M for the victim, spouse and dependents together, and $20M for a group of family members who are not the victim, spouse or dependent. Neither can be worked out from one judgment, so showing it as a step here would mislead you.

An illustration of the mechanics on the number you entered, not your award, not a prediction, and not legal or tax advice. The Fund pays pro rata out of whatever is available each round, and by law no one can predict future round percentages. Your eligibility, caps, offsets, fee, timing, and tax character route to your USVSST/VCF counsel and CPA.

The VCF offset runs one way

A VCF award does not reduce a USVSST payment and is not in the USVSST "other sources" test (the 2019 Clarification Act struck that). You still report it.

The reverse is the opposite: a USVSST payment does reduce a VCF award, because the VCF must offset collateral sources. Both are true at once and are not the same rule. Any specific VCF computation routes to your VCF counsel / CPA.

If you or a beneficiary gets SSI or Medicaid, read this first

An incoming payment can interrupt SSI or Medicaid: counted as income the month received, then as a countable resource the month after (SSI limits are $2,000 individual / $3,000 with a spouse). SSDI and Medicare are not asset-tested and are treated differently.

Shelter before disbursement, not after. If a special-needs or pooled trust is the right tool, it generally needs to be in place before the money arrives. Confirm your situation with a benefits or elder-law attorney (and SSA / your state Medicaid agency) before any funds are paid.

On taxes

A USVSST payment is never flatly "tax-free." Treatment is character-dependent: the portion for physical injury or death is generally excludable under IRC 104(a)(2), while interest, punitive, and income-replacement portions are generally taxable. The Fund issues no 1099 and takes no position. A VCF award principal, by contrast, is excluded from federal gross income (IRS Pub 3920 / IRC 139(f)). Direct every tax question to your CPA.

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Plain English

The Terms, in One Place

The words that come up most often in a 9/11 recovery, defined plainly. This is education, not legal or tax advice; your eligibility and any tax question route to your counsel and CPA.

Foreign Sovereign Immunities Act (FSIA)
The law that makes a foreign country presumptively immune from being sued in a United States court. A family can reach that country only through a specific statutory exception.
State sponsor of terrorism
A country the United States has formally designated. As of August 2026 four are designated: Cuba, North Korea, Iran, and Syria (a process to rescind Syria's designation is underway and could conclude in late August 2026). Only a designated country can be reached under the Section 1605A exception, which is the door the USVSST Fund is keyed to.
28 U.S.C. Section 1605A
The FSIA state-sponsor-of-terrorism exception. It removes immunity only from a designated country, and it is the exception behind the 9/11 families' judgments against Iran and the USVSST Fund's eligibility rule.
JASTA (28 U.S.C. Section 1605B)
The Justice Against Sponsors of Terrorism Act, enacted as Public Law 114-222 in 2016. It reaches a foreign country for an act of international terrorism on United States soil whether or not the country is a designated state sponsor, and it is the basis for the 9/11 case against Saudi Arabia. A JASTA recovery does not feed the USVSST Fund.
USVSST Fund
The United States Victims of State Sponsored Terrorism Fund (34 U.S.C. Section 20144). It pays holders of a qualifying final judgment against a designated state sponsor, pro-rata and in rounds, until it terminates on January 2, 2039.
VCF
The September 11th Victim Compensation Fund, a separate federal program on a separate legal basis. Whether you filed a VCF claim does not decide USVSST eligibility, and a VCF award is not subtracted from a USVSST payment.
Final judgment
An enforceable United States district-court judgment, with all appeals finished. Holding a qualifying final judgment against a designated state sponsor is the USVSST eligibility key. A judgment is not a payment.
Compensatory damages
The category of damages a USVSST claim is based on. By statute it excludes pre- and post-judgment interest and punitive damages.
The 50/50 split
Since 2019 (Public Law 116-69), the Fund must divide each distribution in half, 50 percent to 9/11-related claims and 50 percent to non-9/11 claims, then pay each side pro-rata. Because 9/11 claimants are the larger group, halving the pot yields a smaller per-dollar recovery on the 9/11 side.
Pro-rata distribution
Each round pays eligible claims as a percentage of the amounts outstanding and unpaid, out of what is available that round. The percentage is specific to each round, and by law no one can predict a future round's percentage.
Family caps
The Act sets a $20 million individual cap, a $35 million cap for a family group of the victim, spouse, and dependents, and a lower $20 million cap for a group of non-dependent parents or siblings.
Round
A distribution cycle. In the sixth round (authorized December 2025, paid January 2026), the 9/11 payment percentage was 1.64 percent and the non-9/11 percentage was 5.24 percent, on the same capped-judgment basis. A seventh round has been announced, with at least $275 million anticipated and payments authorized by January 1, 2027; the final amount is not set until after fiscal year 2026 closes.

FAQs

Questions from 9/11 Families

There is no blanket federal exemption for USVSST Fund awards. IRS Publication 3920 covers the September 11th Victim Compensation Fund but does not address the USVSST Fund, and the Fund issues no Form 1099 and takes no position on taxability. For a 9/11 family, the part of a USVSST award that compensates for physical injury or death is generally excludable under IRC section 104(a)(2), while portions like punitive damages or interest are generally taxable. Separately, investment income earned on USVSST proceeds after you invest them is generally taxable. We coordinate with your tax advisor so your plan stays aligned with their guidance. This is general information only; please consult your tax professional.
Every family's situation is different based on age, dependents, income needs, and long-term goals. Generally, we build a diversified portfolio calibrated to your time horizon and risk tolerance, blending capital preservation with long-term equity exposure using William Harrison's research. We do not use a one-size-fits-all approach.
Yes. We coordinate with your legal counsel to understand the timing and structure of any expected distributions, so your financial plan accounts for these funds appropriately. We do not provide legal advice. We focus exclusively on investment and financial planning guidance in coordination with your legal team.
We work with 9/11 families who have received or expect USVSST awards, USVSST fund distributions, or MDL-1570 payments. We serve families who want a long-term fiduciary relationship, not a one-time transaction. Book a free discovery call to discuss whether we're the right fit.

Go Deeper

9/11 Family Planning Resources

Listen

The Math Behind Your USVSST Fund Payout

A plain-English walk through how USVSST distributions actually work: the pro-rata math, the 50/50 split, the 15% attorney fee cap, and why the check is a fraction of the judgment. Educational information only, not legal or tax advice. Tax questions about any award belong with your own tax professional.

Download

After the Check Clears: A Planning Note for 9/11 Families

A calm, sourced walk through the planning that starts once a VCF or USVSST award arrives: getting the tax character right, protecting means-tested benefits like SSI and Medicaid, and slowing down before selling a judgment. Educational information only, not legal or tax advice. Tax questions about any award belong with your own tax professional.

Read the PDF →
Article

Is My VCF Award Taxable in 2026?

Article

USVSST Fund Update: Round 7 and What Families Need to Know

Article

Will the USVSST Fund Get More Money? The Solvency Act Explained

Article

How to Invest a $500K VCF Award Tax-Efficiently

Article

USVSST Catch-Up Payment Explained: The Lump Sum Most 9/11 Families Don't Understand

Article

Where the USVSST Fund's Money Comes From

Article

$344 Million in Blocked Tether: What the July 9 Ruling Does and Does Not Do

Article

Saudi vs. Iran: Two 9/11 Lawsuits, Two Tracks

Article

Am I Eligible for the USVSST Fund, and How Do I Apply?

Article

Does My VCF Award Reduce My USVSST Payment?

Article

Is My USVSST Payment Taxable?

Article

Why Your USVSST Payment Is So Much Smaller Than Your Judgment

Article

The 15% Cap: What a Lawyer Can Charge on a USVSST Payment

Article

Before You Sell Your USVSST Judgment

Article

NYPD 9/11 Responders: How to Stack Your Benefits

Get the 9/11 Family Update

A short email when USVSST rules, payment dates, or the cases families are watching actually move. Next up: the Fund has said the seventh-round amount follows the close of its financial year on September 30. When that number posts, you will get it here in plain English with the source. No spam.

Informational only, and not legal or tax advice. Sirmium Capital LLC is a New York State-registered investment adviser. Unsubscribe any time; we never share your address. Privacy policy.

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What You've Been Through

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