What are the Tax Consequences of a Personal Injury Settlement?

Right around the time of settlement, many clients ask me about the consequences their settlement will have on their taxes.

First, I am not a tax attorney nor an accountant, if you want specific tax advice, go see a qualified tax professional.  That said, generally speaking, personal injury settlements are not treated as taxable income.   There are several exceptions:

  • First, if you receive a separate check for lost wages, that money is taxable as if you earned it as wages.

  • Next, if the release contains a confidentiality provision – the IRS can treat a portion of the settlement as consideration for confidentiality and tax you on it.   The best bet is to make confidentiality mutual.

  • Finally, if you used medical bills that you paid to reduce your tax liability in a prior year and are now receiving money for those same bills, you will need to amend your prior taxes and pay any difference.

If you have questions about personal injury claims please contact Scott for a no cost, no obligation consultation and case evaluation.

How Much is My Case Worth?

The question “how much is my case worth” frequently asked and is quite difficult to answer in the early stages. It is practically impossible to predict the value of a case until all of the information has been collected and you have recovered or almost recovered from your injury.

There are many factors that determine the value of a case which include:

NATURE AND EXTENT OF INJURIES AND TREATMENT

  • “Soft tissue” injuries – strains, sprains, and back pains – are generally valued differently than fractures which are valued differently than catastrophic injuries or death.

  • Extent of the treatment that is necessary to treat the injuries

  • Whether there are any gaps in treatment or issues of non-compliance with order

  • Permanency of your injuries

 ECONOMIC DAMAGES

  • Medical bills, lost wages and other expenditures

  • And whether or not you’ll incur these in the future

 NON-ECONOMIC DAMAGES – the other harms and losses that you sustained but do not come with a price tag or receipt.

  • How bad did it hurt

  • How long did it hurt

  • How much did it interfere with your life

LIABILITY ANALYSIS: The extent of liability on the part of the potential defendant and whether there is any evidence that you caused or contributed in any way to your own injuries

INSURANCE AND COVERAGE: Which insurance company is involved in the case, is there coverage for the loss, and what is the limits of the policy.

If you have questions about personal injury claims please contact Scott for a no cost, no obligation consultation and case evaluation.