Will I Have to Pay Taxes on My Personal Injury Settlement?
After a serious injury, you need a settlement from the at-fault party that covers your losses. But tax season may be on the way, and you’re thinking about how much you’ll need to pay. Will you have to pay taxes on your personal injury settlement?
That worry can affect your ability to seek compensation for your losses. Luckily, a personal injury lawyer can help. If you’ve been hurt and you’re concerned about your claim, reach out to a personal injury lawyer in Tampa for guidance.
Most of Your Settlement Is Non-Taxable
When you’re injured in an accident, you may need some funds to recover from your injuries. These funds for your medical care, rehabilitation, and property damage may not be taxed. The IRS does not tax personal injury settlement funds for a physical injury or trauma that stems from an injury.
That means the majority of your settlement in this case should not be taxed. That gives you a better chance to use those funds for your financial recovery, rather than worrying about how much of your compensation you could lose when tax season comes around.
Your personal injury lawyer in Florida can help you with that, too. They can review the details of your claim and discuss what parts of your settlement won’t be taxed. That gives you a better idea of the funds you’ll have when your claim settles.
What Parts of a Personal Injury Settlement Can Be Taxed?
But that doesn’t mean your entire settlement is not taxable. Parts of a personal injury claim can be taxed, which can affect what compensation you have left for your recovery.
For example, damages for emotional trauma not connected to an injury may be taxed. For example, if you didn’t suffer a physical injury, but your experience left you with anxiety, the damages you receive for that may be taxed.
Any punitive damages you receive can also be taxed. Punitive damages aren’t there to compensate you for your losses. These damages are supposed to punish the wrongdoer for gross negligence, to deter others from being so careless. But because these damages aren’t compensating a loss you experienced, you may see these punitive damages on your taxes.
Determining which parts of your settlement can be taxed is tough. Luckily, your personal injury lawyer can break down the details and help you estimate the value of your claim before you go to court or pay taxes.
Talk to Your Personal Injury Lawyer to Protect Your Settlement
When you’re hurt by someone’s actions, you may need to seek a personal injury settlement to recover from the losses you’ve suffered. But what about your taxes? If you lose a significant portion of your settlement to taxes, you may feel disheartened or worried about paying for your losses.
Here’s the good news—a lawyer from Anderson & Anderson wants to help you get fairly compensated and keep that settlement. If you’re seeking a personal injury settlement and you’re worried about paying taxes on it, get help by calling 813-251-0072 or filling out the online contact form below for a free consultation.