Is My Car Crash or Personal Injury Settlement Taxable?
In order to make informed decisions about your car crash or personal injury case, you deserve to know if your settlement will be taxed. Settlements are about balancing the harm with money. The only way you can know if the harms have been balanced when considering a settlement offer is by knowing what you’re gonna put in your checking account after the closing. The last thing any injured person wants after their case is settled is a surprise tax bill.
In this video, I’m gonna talk about when a personal injury settlement is taxable. I’m Dave Dismuke, Florida Bar board-certified civil trial lawyer, and founder of Dismuke Law, 1.800.ASK.DAVE.
The tax code provides that gross income does not include the amount of any damages received on account of personal physical injuries or physical sickness. In other words, most settlements on injury cases are not taxable, so long as the damages arise out of personal physical injuries or physical sickness. What is taxable in personal injury cases? Interest on settlements generally is taxable as interest income, and should be reported. Also, punitive damages are taxable, and should be reported as other income, even if the punitive damages were received in a settlement for personal physical injuries or physical sickness. Taxes are confusing, and turn on sometimes what may seem to be a minor detail. Be sure to ask your lawyer and tax professional if your settlement is taxable before making an important decision.
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