The majority of personal injury claims are resolved by settlement rather than going all the way through trial. When considering a settlement offer, you need to know what the number will really mean to you and how much of what you receive will be eaten up by taxes. Fortunately, for the most part, damages for physical injury or sickness are not taxable. But there are some exceptions which could be significant in your case. Your personal injury attorney should be able to explain how this works and what damages may be taxed in your case.
Physical Injury or Sickness and Emotional Distress
The damages for your physical injury or sickness are not taxable. That includes your medical expenses, lost income, lost earning capacity and your pain and suffering. But the emotional distress portion is a little different. The damages you receive for emotional distress caused by your physical injury or illness are not taxable up to the amount of your medical expenses, but any amount for emotional distress that exceeds the amount of your medical expenses may be taxed.
Punitive damages are taxable. Punitive damages are not meant to compensate you but to punish the wrongdoer who harmed you. Punitive damages are rare in personal injury settlements.
The impact of taxes on the ultimate monetary outcome for you in a personal injury settlement can be very significant, and you should not try to figure it out on your own. Tax laws are constantly changing. An experienced tax attorney can help you sort through the murky waters of how you may be affected.
If you or someone you love has been injured as a result of someone else’s negligence or wrongdoing and you live or were hurt in Georgia, please call Robbins Law, PC, at 800-772-5555 or email us and schedule your free consultation.