Personal injury case settlements provide compensation to injury victims, and can go a long way towards helping their recovery process. These settlements provide a valuable sense of closure after years of financial uncertainty, medical care, and stress. However, our clients often still have questions after their case is settled. One of the most common questions they have is, “are personal injury settlements taxable?” The answer to this question depends on your case. We wrote this page to help you understand the details about settlements and taxes.
When are Personal Injury Settlements Taxable?
Fortunately, personal injury settlements are by rule non-taxable. However, as with most rules, there are exceptions. Understanding these exceptions will help you figure out where your settlement stands.
- Non-Taxable Injury Settlements
If you receive a personal injury settlement and did not take any deductions in previous years’ taxes because of medical bills stemming from your case, you are in the clear. You do not need to include your settlement amount in your income.
- Deductions for Medical Expenses
Many personal injury cases take several years to complete. Because of this, some injury victims deduct medical expenses they pay from their taxes in the years before they receive a settlement. If you do this, you must include the medical expenses portion of your settlement in your income. Since you already received a tax benefit for those medical expenses, you must pay taxes on them once you receive a settlement.
These are the two major rules when it comes to paying taxes on personal injury settlements. If you have questions about this or any other aspect of injury law, the lawyers at Good Guys Legal can help you.
Utah Personal Injury Lawyers
“Are personal injury settlements taxable?” is not the only question we answer for our clients. In fact, we spend a lot of our time listening closely to our clients’ concerns and finding solutions that work for them. We even wrote a book, 7 Mistakes That Can Wreck Your Utah Accident Case, that helps people understand injury law. Order a free copy today by clicking on the title!
We are committed to winning large settlements for our deserving clients. If you are injured and believe you may have a case, please contact us today. We will get to work building a strong and successful case.