If you’ve been in a car accident, you are probably going through a lot. Dealing with getting your physical injuries treated, medical expenses, time out of work, lost wages, property damage, and dealing with the insurance company can be a huge hassle.
If you’re smart, you’ve decided to work with an experienced personal injury lawyer who can help you navigate this process with the least amount of emotional distress.
If you’re working with an experienced personal injury attorney, you may be about to receive a personal injury settlement. As the time to receive your settlement check arrives, you might be worried about the income tax implications. Will your settlement check count as taxable income?
Will My Settlement Proceeds Be Taxed?
Whether the insurance settlement compensation that you receive is non-taxable depends on the reason for payment: to pay your medical costs, compensate you for pain and suffering, replace lost wages, or as punitive damages to punish the wrongdoer.
As a general rule, the following items would be non-taxable:
- Payments for medical bills
- Payments for physical pain and suffering
However, certain other items will count as taxable income:
- Payments for lost wages or profits – Compensation for lost wages is intended to replace what you would have been earned if you had not been injured. You pay taxes on an insurance settlement for lost wages because wages are taxable, so compensation for lost wages is also taxable.
- Interest on any award
- Punitive damage payments – Punitive damages do not compensate for any loss, so they are taxable under all conditions. The Internal Revenue Service requires you to report them as “other income” when filing taxes.
- Damages for emotional distress – Internal Revenue Code Section 104(a) allows the taxation of damages received for emotional distress
If you have more questions about your settlement check and whether it will be taxed, you should seek legal advice from an experienced personal injury attorney.
Experienced Las Vegas Car Accident Lawyers
We know that being in a car accident can be scary and overwhelming. If you or a loved one has been injured in a car accident and you would like to speak with a law firm with experienced car accident attorneys, contact Anthem Injury Lawyers today. Our phone number is (702) 857-6000. We offer Free Consultations.