Most car accidents are resolved through settlements with the help of personal injury attorneys or insurance companies. When we have to start figuring out how to get our settlement from an accident, there’s a lot of things that we focus on. These primarily include the amount of compensation the injured will receive for lost wages, pain and suffering, damaged property, medical bills, attorney fees, and other expenses. But one thing that many people need to keep in mind is whether or not they’ll have to pay taxes. It’s important to figure out what the taxes may be so that it can be included in the total settlement cost.
What Isn’t Taxable?
For the most part, your accident settlement will not be taxable due to tax code section 104. It states that any amount received as compensation for personal injuries or sickness cannot be taxed. The primary compensation that you receive will be for any medical bills that you’ve had to pay so this cuts out a significant amount that could have potentially been taxed.
What Is Taxable?
In the same way that your regular paycheck would be taxed, compensation for lost wages or profits may be taxed on both a federal or state level. Along with this, settlements which include payment for any emotional distress, rather than physical pain, may be taxed as well. Put simply, any payment that you receive through a settlement that isn’t directly related to medical bills and personal injury can be taxed.
Written and detailed agreements are extremely important in legal processes and personal injuries and vehicle accidents are no exception. The Law Offices of D Chadwick Calvert recommend having any possible tax deductions listed in the settlement agreement before moving forward so that there are no misunderstandings later on.
Taxes on vehicle accident settlements can be complicated. If not filed properly, you may find yourself paying taxes on, say lost wages, for years to come; much longer than necessary. This is why it is important to find professional legal representation to guide and advise you throughout the settlement process. Our staff at DCC Law are experts in both personal injury and vehicle accidents and are always available to assist you with any cases. We also understand that legal representation can be expensive. That’s why we pledge not to charge a penny for our services unless our case is won. For a law office that cares for you and fights for you, call (303) 740-7040 today.