ARE PERSONAL INJURY SETTLEMENTS TAXABLE?

My clients often ask me if they have to pay taxes on their settlement after a car accident or work injury. Although I am not a tax attorney (and clients should consult with a tax attorney for specific advice), here is what the Internal Revenue Services says after the taxability of settlements from car accidents and other personal injury matters.

Settlements for physical injuries or physical sickness are generally non-taxable. If you receive a settlement from a car accident or other claim from physical injuries or physical sickness and did not take an itemized deduction for medical expenses related to this injury in prior years, the full amount is non-taxable and generally does not need to be reported on your income tax return. HOWEVER, if you receive a settlement for physical injuries or physical sickness and did deduct medical expenses related to this injury, the tax benefit amount is taxable and should be reported as "Other Income."

The amount of interest on settlements stemming from a car accident or other physical injury is taxable as "Interest Income" and should be reported.

The amount awarded for punitive damages is taxable and should be reported as "Other Income."
If the settlement amount is broken down and includes monies specifically allocated for emotional distress or mental anguish, those monies could be taxable. It is important that you talk with a tax attorney for advice specific to your settlement.

If you have been injured in a Florida car accident or work injury, you should settle your case without talking with an attorney. Insurance companies have attorney working for them, so should you.

My Tampa Bay personal injury law firm has been fighting for the rights of those injured in Florida car accidents and work injuries for over 53 years. For a free case consultation, simply click here to visit my website, MatthewNoyes.com.