In a perfect world, you would receive compensation for your personal injury and get back to your life. Unfortunately, there are forces outside of the judicial system that bring responsibility with such compensation. Here’s what you need to know about paying taxes on your personal injury settlement.
Medical Expenses and Injuries
The overwhelming number of settlements and judgments are for compensatory damages and general damages, which are meant to compensate you for your medical expenses and pain and suffering from your injuries. If you only receive compensatory or general damages for your physical and medical expenses, most of that amount is not subject to taxes because it is meant to reimburse you.
Vehicle and Property Damage
Any compensation you receive for vehicle damage stemming from an auto accident is not taxable, whether it’s the money you paid to fix your car or get a rental.
Lost Income
Money received as compensation for lost income is subject to income tax, just like your regular income. If your settlement or judgment includes compensation for other types of losses, such as medical expenses and property damage, you must still pay taxes on the lost wages portion.
Punitive Damages
Punitive damages, which are meant as a punishment against the defendant, are not usually common. They are only awarded in especially extreme circumstances where a defendant shows particularly egregious behavior. In the case you are awarded compensation for punitive damages, they are almost always taxable.
If you are involved in an accident that is not your fault, you may be able to recover compensation for past, present and future medical bills, rehabilitation, lost wages, pain and suffering and funeral expenses (if your loved one is killed). Contact our New Orleans personal injury lawyers at The Womac Law Firm today to learn how we can help.
Call (504) 470-3935 or contact us online for a free consultation.