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Do I Need To Pay Taxes On My Settlement?

Do I Need To Pay Taxes On My Settlement?

If you have reached a settlement or obtained a judgment following a car accident or personal injury matter, you may be wondering, “Do I still have to pay taxes for my compensation?”

The answer is often, “No.” However, you may have to pay taxes based on the circumstance and nature of your settlement or judgment.

In most cases, settlements and judgments are for only “compensatory damage” and “general damages,” which is compensation for medical bills, lost earnings, as well as the pain and suffering caused by the injuries. Most of that amount is typically not subject to taxes, since the settlement or judgment is meant to reimburse the plaintiff of his or her out-of-pocket losses. Furthermore, any award you receive for vehicle damage – as a result of a car accident – is not taxable.

However, any settlement or judgment amount you receive as compensation for lost wages may be subject to income tax. Since your original income would have been taxable had you not suffered the loss of earnings, so any compensation intended to replace that same lost wages should be also taxable. When it comes to punitive damages, they are almost always taxable.

Alas, it is imperative to understand that only your tax advisor can provide you with proper tax advice. Your personal injury attorney should be able to give you basic information on taxability of your settlement or judgement, but ultimately, seek out the advice of a tax professional.

If you suffered an injury in an accident caused by a negligent party in North Carolina, contact our Raleigh personal injury attorney today at Hyland + Padilla PLLC today.

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  • Con el abogado John Padilla tengo una muy buena representacion legal, me a representado en 2 casos, es muy serio, entregado en su trabajo y muy responsable, ve siempre el mejor bienestar del cliente con excelentes resultados.... Excelente Abogado lo recomiendo

  • ANDREA MCRAE
    ANDREA MCRAE
    2020-04-14
    Google

    Hello I am a client of Ms Andrea Fowler. She has handled many cases for me from car accidents and personal injuries. She handled these cases with accuracy and professional. She GETS THE JOB DONE!! I would recommend her to anybody. I am very happy with the way she handle my cases. SHE IS AWESOME!!!!!!! And also her team of professionals. THANK YOU FOR EVERYTHING YOU'VE DONE FOR ME AND MY FAMILY!!! You GUYS ARE THE BEST!!! MRS. ANDREA MCRAE

  • Julio
    Julio
    2019-05-22
    Google

    Tuve un accidente automovilístico al contactarme con los abogados de Hyland y Padilla, pude obtener las respuestas que necesitaba y ganar mi caso, para cubrir mis facturas médicas completamente junto con los fondos adicionales recibidos por dolores y sufrimientos de compensación. Recomendaría a Hyland y Padilla a cualquier amigo o colega.

  • Juanita
    Juanita
    2019-05-22
    Google

    Me lastimé en el trabajo y me puse en contacto con los abogados de Hyland y Padilla. Pude hablar con un abogado en vivo de inmediato y me ayudaron a ganar mi caso.

  • Michelle
    Michelle
    2019-05-22
    Google

    Hace poco tuve problemas legales y llamé a un abogado de Hyland y Padilla. Afortunadamente, podrían ayudarme y me siento confiado en recomendarlos a cualquier persona que necesite ayuda legal.

  • Juan S.
    Juan S.
    2019-05-03
    Google

    Los abogados de Hyland & Padilla me ayudaron a recuperarme de mi accidente en 2017. Me caí al trabajo, me rompí la pierna izquierda y no pude trabajar. Andrea me ayudó con los tribunales y consiguió dinero para mi lesión. Ahora no tengo que elegir entre pagar las facturas y recuperarme de una pierna fracturada.

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