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Taxes On Personal Injury Settlements Or Awards

On Behalf of | Apr 18, 2018 | Personal Injury


After going through the process of filing a claim with an insurance company for injuries or damages caused after a car accident, a person receiving this compensation may wonder if he is required to pay taxes on the settlement. The answer here depends on what the compensation received covers.

Compensation for physical injuries or sickness is not considered income, and therefore is not taxable. This would cover most settlements paid to cover medical expenses and other costs directly related to the treatment of the physical injury or sickness. In some cases settlements include more than just compensation for the medical bills, they may include compensation for emotional distress suffered as part of the accident. The settlement for emotional distress can in some cases be taxed, which usually occurs when the award for emotional distress is not linked to a physical injury.

A settlement that provides compensation for car repairs and the repair of other property damage is not generally subject to taxation as income. This is also the case for compensation for rental cars or other temporary transportation that the plaintiff had to pay for while his car was being repaired.

It is possible to receive lost wages as part of a settlement for personal injuries suffered in a Florida car accident, either from the injured party’s PIP insurance, or from the other driver’s insurance company. The compensation for lost wages can also include future lost wages if it is proven that the person will lose more time at work as a result of the accident. Any part of a settlement that seeks to compensate for lost wages will be taxable because any wages a person may have earned if not for the car accident would have been taxed.

In the rare event that a jury award or settlement includes punitive damages, that part of the award will be subject to taxation.

Settlements are not always divided up into different categories outlining what the compensation covers. In this case it may be more difficult to determine how much should be paid in taxes. It is always best to consult with your personal injury attorney to determine which part of your settlement covers which parts of your claim, and may therefore be taxable.

Additionally, there may be slight differences in when a settlement triggers taxes, even when it would ordinarily not be taxable, based on whether or not the person took a deduction for the expenses compensated by that portion of the settlement in the past. Because these are more detailed tax matters, you may need to consult directly with a tax expert who can answer these questions more in an in depth manner.

Contact us For Legal Assistance

If you were involved in a car accident in Florida and suffered serious injury or permanent disfiguration, you may be able to seek compensation from the driver who caused the accident. For a free consultation to learn more about how you can seek compensation for the injuries you sustained, contact an experienced car accident injury lawyer at Vocelle & Berg, LLP, in Vero Beach, Florida.


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