After a severe accident that resulted in significant injuries, your tax consequences are probably the last thing you are thinking about. However, taxes are legitimate, and legal winnings are subject to tax rules just like anything else. The great news is that in almost every case, a Greensboro Car Accident settlement or jury verdict will not result in additional tax consequences for the winning side. Below is a short overview of tax rules about the settlement funds related to your Greensboro Car Crash award.
Financial Awards for Physical Injuries or Sickness
In almost all scenarios, compensation for losses coming from an auto crash injury or sicknessare not taxable income according to the IRS. This includes money/funds received for:
– Medical bills
– Lost wages
– Pain and suffering
– Emotional losses and distress
While most Greensboro Personal Injury plaintiffs get to keep their entire share of the settlement without tax consequences, there remain a few interesting exceptions to this rule.
First, some of the money you received in exchange for medical expenses that you paid or incurred might be taxable. While your lawsuit was in the court system waiting, you might have paid for some treatments on your own while you waited for the case to settle or to be tried. You may have deducted those medical expenses from your taxes in the years prior to receiving this check, and if you got a tax benefit because of the deduction, you have to claim this exact (and only this) amount as income when you receive the money for the expenses you deducted in the past. This may become complicated.
Punitive Damages
If someone acted particularly terribly in the process of causing your injury, you might receive “punitive damages” on top of the normal “compensatory” damages that are meant to repay what is owed. Punitive damages are taxable, without question, and you will need to sadly claim the portion of punitive damages as taxable income.
When you have a pending Greensboro Car Accident case, don’t hesitate to discuss the issue of taxes with our firm or your lawyer.