If you’ve been injured in an accident that was caused by someone else’s negligence and are in the process of pursuing a settlement via a personal injury case, you may have questions about the tax implications of such a settlement. The thought of the accident costing you even more in financial outlay can be daunting, but you will be glad to know that, generally, no, your settlement will not be taxed. Because it is not quite that easy, however, it’s important to better understand the tax basics as they apply to personal injury settlements generally. An experienced Boca Raton personal injury attorney can help you with all of your legal concerns related to the injurious accident.
Your Specific Damages
If you have been injured in an accident that was caused by the negligence of someone else, you can expect to experience certain kinds of damages that can include:
- Medical expenses
- Lost wages on the job
- Physical and mental pain and suffering
- Permanent injuries and impairments
These tend to encompass the damages associated with most personal injury cases.
Different tax rules apply to different portions of your settlement amount. Let’s take a closer look:
- Your Medical Expenses – Personal injury cases often lead to exorbitant medical bills, but none of your settlement amount that corresponds with your medical expenses is taxable. This includes medical expenses related to immediate and ongoing care.
- Your Lost Wages – The compensation you receive for lost hours and wages on the job, on the other hand, are taxable – just as they would have been if you’d received them in the form of pay.
- Your Pain and Suffering – Things get even trickier with the compensation for your pain and suffering. Typically, the compensation you receive for the physical pain and suffering associated with your accident and attendant injuries is not taxable. This compensation is considered to align with your compensation for medical expenses and, therefore, avoids tax liability. Emotional pain and suffering, on the other hand, is considered outside the bounds of compensating you for your physical injuries and may be taxed.
- Punitive Damages – Punitive damages refer to money that is awarded in cases involving especially egregious negligence as a mechanism for punishing the at-fault party. This payment, again, is considered outside the boundaries of your actual physical damages and is, therefore, subject to taxation.
- Interest – Any interest you receive on any portion of your settlement is beyond the strict realm of your compensation and is likely taxable.
In other words, the tax implications of personal injury settlements can be complicated.
An Experienced Boca Raton Personal Injury Attorney Can Help
If someone else’s negligence leaves you injured, the Boca Raton personal injury lawyers at Demand the Limits Personal Injury Attorneys are committed to skillfully advocating for compensation that covers your damages in their entirety, and that provides you with the means to reach your fullest recovery. Your case and your rights matter, so please don’t hesitate to contact or call us at (561) 600-3555 to schedule a free consultation today.