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Is The Personal Injury Settlement Taxable? - Consult The Personal Injury Lawyer Orange County
by stephen m. BloggerIf you settle the personal injury case, do you
have to pay state or federal income tax? In most cases, the answer is no. It
means you don’t have to pay taxes on any personal injury settlement you have
received. Now, at least to the extent that the amount you get is meant for
compensating you for injuries suffered.
The general rule when it comes to personal
injury payout and income tax, but you must know there are some exceptions. Of
course, you can hire a personal injury lawyer Orange County for assistance.
Settlement For Injury Or Illness Would Be Tax-Free
The federal income tax code specially
excludes from one’s gross income the amount of any damages received, by
insurance settlement or lawsuit, as long as the proceeds are compensation for
physical illness, physical injuries.
All state tax codes follow the federal tax
codes. This means you don’t have to pay state or federal taxes for a personal
injury settlement.
In other words, if you win an award in a
personal injury lawsuit, you are going to pay taxes on the funds meant to cover
the punitive damages, while the funds meant to cover the injuries would be
tax-free.
Punitive Damages Award Is Taxable
One exception to the non-taxability of
injury lawsuit proceeds is when your compensation comes in the form of punitive
damages. This is paid by the defendant as punishment for particularly outrageous
conduct, which is meant to deter others from such similar conducts.
When you win an award in the personal
injury lawsuit, with the help of your personal injury lawyer Orange County, you
would have to pay taxes on the funds that are meant to cover the punitive
damages.
However, the funds that are meant to cover
the injuries would remain tax-free.
The good news is that if you have to pay
taxes on the punitive damages award, you are allowed to deduct your lawyer’s
fees that relate to this punitive damage award.
In simple words, if you are awarded $100,000
for the punitive damages and you have agreed upon 1/3 contingency fee with the
lawyer, you can deduct $33,333.33 in the lawyer fees related to the punitive
damage award.
It is important to note the punitive
damages are rarely a component of any personal injury claim.
What Does IRS Consider As Taxable?
The IRS clearly states out which portions
of personal injury settlements get excluded from income taxation. You can
consult your personal
injury lawyer Orange County for further assistance.
As you know you cannot be taxed on money from the settlement or jury award meant to compensate you for:
- Emotional distress caused due to physical injuries
- Physical injuries
- Lost wages from physical injuries
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About stephen m. 
Blogger
8 connections, 0 recommendations, 47 honor points.Joined APSense since, January 8th, 2019, From Los Angeles, United States.
Created on Jun 17th 2019 01:59. Viewed 887 times.
