Is a Car Accident Settlement Taxable?
You’re likely already aware that filing a legal claim for your car accident could help you recover the economic damages you need. If you’re wondering if a car accident settlement is taxable, read on to learn about some primary concerns.
Car Accident Settlement Tax Liability
As the victim of a car accident caused by someone else’s negligence, you know that filing a claim for your injuries can help you recover damages. Depending on the damages in question, however, the overall tax liability related to your settlement with the at-fault party’s insurer could change.
Some of the most common damages awarded in a car-accident settlement could include:
- Medical Expenses – These damages include expenses like hospital bills, ambulance costs, and other expenses related to medical care following your accident. In most cases, these damages are non-taxable, although having claimed a deduction on your last tax return could affect this.
- Lost Wages – When you’re injured in a car accident, you might be able to receive damages for lost wages from missed work. Because these are related to your income, these are generally considered taxable expenses.
- Pain and Suffering and Emotional Damages – Because the tax code makes no reference to pain and suffering, these should generally be considered tax-free damages. In addition, any costs of emotional therapy related to your accident would be considered medical expenses, and therefore not subject to taxation.
Contact a Car Accident Lawyer for Your Settlement Questions
With so many damages potentially at stake for your car accident settlement, ensuring that your tax liability from your settlement is covered can give you peace of mind. At The Law Offices of Casey D. Shomo, our experienced team of car accident lawyers can help you with your settlement.