Some parts of your personal injury settlement may be taxed. The IRS and the State of California will be concerned with the reimbursement for your lost time at work and damaged personal property (like car repair costs). Support you are awarded for your medical bills, your physical pain, and your emotional trauma would not be taxed.
This is just information to get you pointed in the right direction at tax time. Personal injury victims should discuss what should be submitted to the IRS with a tax expert.
What Part of a California Personal Injury Settlement Can be Taxed?
A personal injury settlement check can arrive as a great relief. Victims may have been watching medical bills pile up while waiting on an insurance company to accept the blame for an at-fault party. Victims may also have been making do without weekly income while they’ve been unable to work and falling behind on normal monthly bills, like car payments.
Settlement money is a welcome sight, but just like all profits, the tax man will want their share of some of it.
What is usually taxed in a personal injury settlement:
- Settlement money received to replace the paychecks and benefits while your injury has kept you out of work.
- Property damage compensation, such as car repair or replacement money or damage to personal items.
- Money received for punitive damages. This is money that is usually taken from an at-fault company or corporation to punish them for reckless behavior that caused an accident. Victims usually receive the fines assessed on a business, and it would be taxed.
What isn’t usually taxed:
- Compensation you receive to pay cover medical costs for an injury or a sickness suffered in an personal injury incident.
- Compensation for the physical pain you’ve suffered and may continue to suffer.
- Compensation for the emotional trauma you’ve endured and may continue to have to cope with.
- Compensation for factors involving a loss of quality of life.
You can find information on our page about reporting personal injury settlements on your taxes.
Contact a California Personal Injury Lawyer
Before you need to worry about taxes, you need to focus on getting the maximum in compensation for your injury. A skilled Maison Law attorney can help.
Speak with a real California personal injury attorney after any type of accident caused by someone else’s carelessness results in a serious injury. It’s important to know about every benefit available to you and your family because an insurance representative won’t be informing you about your options.
Contact Maison Law for a free, no-obligation consultation. It’s a no-risk way to find out what your injury is worth and what you should be holding an insurance company to.
