Is a Personal Injury Settlement Taxed?
Being involved in an accident is arguably one of the most stressful experiences a person and their family can go through, especially when the injuries are caused by another's negligence. If you are considering filing a lawsuit or have recently won a settlement, you may have concerns about the tax implications. When you are trying to recover compensation to cover your medical bills and expenses, the last thing you should have to worry about is your settlement being taxed.
In most cases, your settlement cannot be taxed. However, there are special circumstances which can lead to you having to pay taxes on your settlement. There are also situations where a portion of your settlement is taxable and a portion is not. We aim to provide you with the information you need to understand how your settlement will affect your taxes.
A few factors to consider about your personal injury settlement include:
- Any funds given to you to cover expenses or related costs as a result of your injuries cannot be taxed. This includes legal bills, medical bills, and any type of recovery or rehabilitation costs.
- Punitive damages you receive are most often considered taxable income. This includes compensation for pain and suffering, as well as damages for lost wages.
- If you worked with a personal injury attorney on a contingency fee basis, the firm will take a small part of your settlement before it is given to you. Your funds will generally be put into a trust account.
- There are laws in place which outline which parts of a settlement are taxed and which are not. However, the judge will make the final decision on exactly how much in taxes you will have to pay.
If you are looking for a personal injury attorney in Joplin and Springfield to represent you, turn to Johnson, Vorhees & Martucci for help. We can ensure you understand all aspects of your case and the settlement you receive.
To request a free consultation, call us now at (833) 600-0125.