April 15 is right around the corner, which means millions of people are
organizing their finances and sending their returns to the IRS. If your
legal team successfully obtained a car accident settlement on your behalf,
you may be wondering whether your settlement is taxable or not. In most
cases, the IRS does not tax car accident settlements though there are
exceptions. Some taxable elements of a car accident settlement may include
interest on any award, damages of emotional distress or pain and suffering,
payments for loss of wages or work, and most punitive damages.
According to the
IRS, “If you receive a settlement for personal physical injuries or
physical sickness and did not take an itemized deduction for medical expenses
related to the injury or sickness in prior years, the full amount is non-taxable.”
This means your settlement is not considered part of your income, but the
best way to protect as much of your compensation as possible is to include
tax considerations in any negotiations with the other party. The same
regulations apply for settled claims regarding emotional or mental distress,
though any proceeds used for a pre-existing illness must be included as
part of your income.
Contact Our Car Accident Attorneys Today
As with any legal situation, the answer depends on your particular situation.
It is vital you do not miss any payments to the IRS or accidentally double-dip
your benefits, and our trusted car accident attorneys of Gruenberg Kelly
Della will direct you on the most effective and efficient path to resolution.
We refuse to back down from a challenge and will do everything possible
to ensure you and your rights are protected. Don’t risk facing this
difficult time without us on your side.
Interested in speaking to a success-driven and results-oriented Long Island
car accident lawyer?
Call us at (888) 305-6372.