Are Personal Injury Settlements Taxable?
If your legal team was able to successfully obtain the outcome you deserve after an injury or accident at the hands of another, you are likely wondering if your settlement is taxable or not. The IRS generally does not tax personal injury settlements, though there are exceptions to this rule. Some taxable elements of your settlement include emotional damages, payments for loss of work, any interest, and most punitive damages. If you receive a settlement for your physical injuries and did not previously take a deduction for your medical expenses, your settlement is non-taxable. Any income directly traceable to the relevant injury or accident will not be taxed.
The IRS is notorious for relentlessly coming after whoever they consider has double-dipped their benefits or missed any payments owed. This is why it is absolutely vital you include tax considerations in any negotiations with the responsible party, even though your settlement is not technically considered part of your income. Emotional injuries and punitive damages are regulated under the same circumstances. However, any finances that go toward a pre-existing mental illness are considered part of your income. As you can see, navigating the complexities of these tax considerations is overwhelming and confusing which is why it requires the expertise of a qualified lawyer.
Injured in Brooklyn? Trusted Personal Injury Attorneys Offering Quality Counsel
No matter the nature of your injury, there is no time to waste before you enlist the services of a legal team you can trust to prioritize your needs. At Koenigsberg & Associates Law Offices, we have the skill and tenacity to guide you through this process with ease. Allow us to be the ultimate ally during your time of need.
Are you interested in scheduling an initial consultation with a member of our firm? Call (718) 690-3132 at your earliest convenience.