Some parts of a car accident settlement may be taxed. The reimbursement victims receive for their lost time at work and car repair or replacement costs. Support you are awarded for your medical bills, your physical pain, and your emotional trauma would not usually be taxed.
Car accident victims should seek professional guidance from a tax expert after receiving a collision settlement for the final word on what should go on a tax form.
What Part of a California Car Accident Settlement Check Can be Taxed?
After a frightening car accident, settlement money from an auto insurer is a welcome sight. Victims will finally have the money to get their cars fixed and perhaps to pay off some massive hospital bills. But cashing that check isn’t the end of the victim’s duty.
Parts of a settlement award or car accident judgment are taxable. To figure out what is and isn’t taxable, you should trust the expertise of a tax professional when you file your taxes.
This is a general idea of what parts of a car accident settlement may be taxed by the State of California and the IRS:
What usually gets taxed in a car accident settlement:
- Settlement money received to replace income and benefits while an injury has kept you out of work.
- Property damage compensation, such as car repair or replacement costs. Money received to replace items damaged inside the car like clothing, computers, and phones could also be subject to taxation.
- Money received for punitive damages. This is a less common form of compensation for California traffic accident victims. A judgment for punitive damages is assessed to punish a driver or a delivery or trucking company for extreme negligence. It is money that’s taken from the at-fault party as an extra penalty for their reckless, almost intentional behavior, that caused an accident. It’s meant to punish the guilty driver or business, but the victim of the accident would still receive the money paid for the fine. That money would probably be taxed.
What isn’t usually taxed in a car accident settlement:
- Compensation you receive to pay cover medical costs for an injury or a sickness suffered in a traffic collision.
- 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 Car Accident Lawyer
Speak with a skilled California Car Accident Attorney after a collision caused by someone else’s carelessness leaves you or a loved one with 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 all of 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 demand from insurers.
