What you need to know about personal injury settlement taxation in Florida
Taxes are one of the last things that someone injured in an accident wants to worry about after receiving a personal injury settlement. Fortunately, in Florida, most personal injury settlements are not taxable. In addition, personal injury settlements are generally not taxed by the federal government either. Examples of untaxable personal injury claim compensation include:
- Medical bills ‘ Compensation received due to sickness or physical injuries, including medical bills, isn’t taxable.
- Pain and suffering ‘ Settlement funds received for pain and suffering, since they relate to physical injuries and sickness, aren’t taxable.
However, there are some exceptions to this rule. There are certain types of personal injury compensation that fall outside the above categories, making them taxable. Examples of damages typically received in relation to a personal injury claim that may be taxable include:
- Lost income ‘ When an injured person receives lost income as part of his or her personal injury settlement, this money is taxable, as lost income is treated as regular income by the Internal Revenue Service.
- Punitive Damages ‘ Punitive damages, which are awarded to punish the liable party and compensate the victim, are considered to be a form of income, as they are beyond the scope of the initial loss.
- Emotional Distress ‘ Whether emotional distress is taxable depends on whether it is directly related to the injury suffered. If it is directly related to the injury, then it is not taxable.
- Interest ‘ When interest is received on any portion of a personal injury settlement, taxes may be assessed, as interest goes beyond any funds received due to physical injury.
There are a number of variables involved when determining which portions of a personal injury settlement, if any, are taxable. Therefore, it is advisable to seek the guidance of an experienced personal injury attorney when examining this issue.
Our Boca Raton personal injury lawyers are here to help you and your family
At GED Lawyers, LLP, we are a results-driven law firm, and we’re always ready and willing to fight for your right to compensation. We know how difficult it is to deal with injuries suffered due to the negligence of others, so we always pursue your quest for compensation with diligence and compassion. If you’ve been injured, or have taxation questions related to your personal injury settlement, please call 561-995-1966 or use our online contact form to speak with one of our dedicated attorneys today. The case review is free.