If you have received a personal injury settlement, are in the process of negotiating one, or are considering pursing one, you probably have a lot of questions. As spring approaches, there’s one thing running through everyone’s mind: taxes. You may be wondering if your personal injury settlement will be taxed. Whether your settlement was for a car accident, truck accident, slip and fall accident, dog bite, wrongful death claim, product liability, or something else entirely, the answer remains the same: most of your settlement won’t be taxed, but certain parts will.
Unfortunately, the answer isn’t as straightforward as a yes or no. Like many aspects of taxation, taxing personal injury settlements can be complex. That’s why it’s advisable to seek the help of a skilled Georgia personal injury attorney so your settlement can best address these tax concerns and so you know how to pay taxes on this settlement. An attorney may also be able to help you structure your settlement to minimize what is taxed and let you keep as much of your settlement as possible.
What Parts of My Settlement Will Be Taxed?
Because personal injury settlements are intended to replace what you had and lost as a result of someone else’s actions, most of your settlement won’t be taxable. The IRS sees a settlement as reimbursing you for something that you’ve lost or will likely lose as a result of an injury, rather than income. Therefore, most of it won’t be taxed. However, some components are taxable, and those components tend to resemble income:
- Lost wages or lost profits.
- Interest on your personal injury settlement award.
- Punitive damages (not often awarded, but they are damages awarded in some personal injury settlements intended to punish the person at fault and prevent them from doing the same thing again).
What Parts of My Settlement Won’t Be Taxed?
As mentioned above, all components of the settlement that are reimbursements for a loss, rather than income, won’t be subject to tax. The following components to a personal injury settlement won’t be taxed:
- Physical injuries and sickness.
- Emotional distress and mental anguish (the tax code version of pain and suffering).
- Property damage.
Maximize Your Settlement with the Skilled Personal Injury Attorneys at Richard D. Hobbs & Associates
With over three decades of experience practicing personal injury law, the attorneys at Richard D. Hobbs & Associates have represented thousands of clients. Our practice is exclusively dedicated to personal injury law, and our attorneys can guide you through the process. We will fight zealously and relentlessly to get you the compensation you deserve for your losses. We understand that in personal injury cases, your focus needs to be on your recovery and getting your life back on track.
That’s why we will take care of everything else, big and small, to make sure you can focus on what matters most. We will take care of every aspect of your case, from investigating the circumstances surrounding the injury, gathering evidence, filing a claim, negotiations, and, if needed, trial. We won’t let anything slip through the cracks and we will support you every step of the way. Contact us today for a free, confidential case review and consultation.