When you get hurt in a car accident and receive a settlement, you may be wondering if that money is taxable. In most cases, you do not have to worry about it. There are certain types of damages that can end up being taxable though, so it’s important to know a bit about the rules and how you should prepare to deal with a potential tax bill. Our Monmouth County car accident attorneys can tell you more.
What Parts of a Car Accident Settlement Can Be Taxable?
In most cases, when you sue over a personal injury, your settlement is not going to end up being taxable. These damages are compensatory, meant to make up for things like medical expenses and lost wages. As a result, your settlement is not going to be seen as taxable income by the IRS or state treasury.
There is one potential exception though. Victims who sue over just emotional and psychological industries may have to pay taxes on the damages received. So if you didn’t break any bones but you still suffered PTSD, your settlement may be taxable. However, if you can show that emotional injury also causes physical issues, then you may be able to avoid a tax bill.
Are Punitive Damages Taxable?
Another part of a settlement that can be taxable is punitive damages. These are levied at a defendant who has behaved in a particularly reprehensible manner. A drunk driver who causes serious injuries is an example of someone who may end up paying punitive damages.
Because this money is not meant to compensate you for the costs of an accident, it can end up being taxable. Your lawyer can help you prepare for this possibility. We should also note that punitive damages are not awarded in many cases, so it’s possible that you won’t have to worry about this at all.
When Should I Hire a Lawyer?
If you are considering pursuing damages, you should talk to a lawyer as soon as you can after an accident. The sooner you act, the easier it can be to secure important evidence and the sooner you can receive your settlement.
Your lawyer can help you negotiate for fair compensation and warn you about any potential tax implications. If you have questions about the legal process, we are here to answer them.
Will I Have to Go to Trial to Win Damages?
It is possible that you will have to go to trial, but many cases like these end up settling before that point is reached. Whether we can negotiate a settlement with an insurer or we need to fight for a verdict in court, our lawyers are prepared to offer you all of the assistance that you need with your case.
Talk to Our Legal Team
When you are ready to pursue compensation after a car accident, contact the Wilton Law Firm. We can schedule a free consultation and tell you more about how our lawyers can help you with your accident claim.
