Are Car Accident Settlements Taxable? Money from a car accident settlement is usually tax-free.

If you received an award settlement after a car accident, part of your damages might go towards taxes. Whether you will owe taxes on your award and how much you will owe depends on the reason the court awarded the money.

If you are concerned that your award will decrease due to taxes, talk to an accountant. If you wish to discuss your claim and whether you are getting fair compensation for all your damages, the Law Offices of Anidjar & Levine can help.

For a free legal consultation, call (800) 747-3733

In This Article

Which Types of Damages Are Taxable?

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Which Types of Damages Are Taxable in a car accident?

Many car accident victims experience physical injuries, emotional trauma, and financial difficulties that require compensation. Thus, accident victims may agree to damages for lost wages, medical expenses, and other types of damages. Taxes will vary depending on the type of damages. Here are some common examples:

  • Medical expenses – The biggest amount of award money for many accident victims is the award for medical expenses. The court will compensate you for surgeries, hospital stays, medical treatments, and various other medical costs. This money is usually tax-free. However, if you took deductions on your latest tax return and received a reimbursement, the reimbursement may be taxed.
  • Lost wages – Car accident victims may be forced to miss work for physical and emotional recovery. Lost wages provide these victims with compensation for the wages they would have earned if the accident had not occurred. Because wages are generally taxable income, lost wages are also taxable.
  • Pain and suffering – The court awards damages for pain and suffering in an effort to compensate a victim for injuries, as well as any physical discomfort stemming from the accident. According to the Internal Revenue Code, damages stemming from physical injury are generally not taxable.
  • Emotional damages–The tax code excludes any damages intended to compensate you for emotional suffering (e.g., depression, emotional distress, PTSD) from taxable income. Additionally, the cost of treatment for your emotional trauma falls under the category of medical expenses and is therefore not taxable.
  • Property damage– If your vehicle sustained damages in the accident, the money you receive for repairs and replacement is generally not taxable.
  • Punitive damages– The Internal Revenue Code states that punitive damages may be subjected to taxation. This is because punitive damages are intended to punish the behavior of the at-fault party rather than to help the victim recover.

When you consult with our firm, we can review what damages you suffered and what sort of compensation you may be able to receive. The exact amount you can get in compensation will depend on what happened in your specific case. 

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How Can an Accident Victim Recover Damages?

In Florida, car accident victims will likely receive insurance benefits and other damages through one or more of the following:

  • Settlement– The victim’s insurer and/or the at-fault party’s insurer may make an offer to cover some or all of the victim’s medical expenses and lost wages. If the victim accepts the offer, they have agreed to a settlement.
  • Jury verdict– If the victim’s injuries are ‘severe,’ according to Florida law, and the victim was unsatisfied with the insurer’s offer, our attorneys may assist the victim with the filing of a lawsuit against the parties responsible for their accident for additional damages. In some cases, a jury will determine if the defendant was at fault for the accident and if the defendant’s negligence caused the plaintiff’s injuries. If so, the jury may award damages to the plaintiff.
  • Bench trial– If there is no jury, a judge will make decisions regarding all the issues of the case and determine the plaintiff’s damages.

To save you time, stress, and money, our attorneys will do everything possible to avoid going to trial and attempt to negotiate a fair settlement deal with the insurer. However, if your injuries are too severe or the insurer refuses to cooperate, we may have no choice but to push forward with your claim in court.

Is My Car Accident Case Worth It After taxes?

If it’s going to be taxed, is it worth pursuing the case? Whether or not you seek compensation is up to you, and it will depend on the specifics of your case. Remember, you still get the compensation, even if you have to pay taxes on it. And not every type of compensation is taxable. 

Remember a clear distinction: An attorney can help you with your case, and an accountant can help you with your taxes. Getting the right help and advice can help you understand everything along the way. 

Legal help in your car accident case:

Many car accident cases can be challenging to handle alone: they are complex and confusing. Consulting with an attorney specializing in car accident cases can be extremely helpful.

When you consult with our firm, we can estimate how much you may be able to get in compensation. The compensation estimate can help you take legal action in your best financial interests. Our goal is to get you the compensation you deserve to help cover your expenses. 

Help in understanding your taxes

Suppose you have recently recovered compensation after a car accident. In that case, you might be worried about which parts are taxable and which are not. It is best to consult with someone who specializes in this area.

For example, when you consult with an accountant, you can review what compensation you received and why you received the compensation. Based on this information, an accountant can help guide you through what portions of your compensation are taxable and which parts are not. 

What Our Law Firm Will Do for You

When you hire a personal injury lawyer at the Law Offices of Anidjar & Levine to represent you in your car accident case, we take care of everything so you can rest and recover. Our attorney will:

  • Investigate your case
  • Gather all evidence
  • Determine the liable party or parties
  • Negotiate with the insurance companies on your behalf
  • Handle all communications with the at-fault driver and their attorney
  • Keep you updated on the progress of your case
  • Take your case to trial if necessary

Our team will also ensure all pertinent paperwork is filed on time with the court. This way, you will not lose your chance to seek the compensation you need and deserve as a result of the car accident.

Client testimonials

Clients who have worked with us have been highly satisfied with our services after their car accident cases. Here’s what just one of them had to say:

“Words cannot express how grateful we are to Andijar & Levine for everything they have done for us. From day 1 they have been there right by our sides throughout this whole process. My husband and I were in a terrible car accident in November 2015 and didn’t know what to do. We were both injured and without a car since it was totaled in the crash so Andijar & Levine sent one of their representatives name Charlie to our home to get the process started. Charlie was very professional and reassured us that everything was going to be fine. Marc Andijar was awesome from day one as well.” ~ Jessica

Can I Afford To Hire a Car Accident Attorney?

You might be feeling overwhelmed by the costs related to your accident. And you may also now be worried that the government will tax part of your compensation. Take a deep breath. We understand things have been difficult since your accident. 

We want you to understand your options and get the legal help you need. We do not charge you for our legal services upfront. We will only charge you for our services if we help you get compensation. We take a percentage to cover your legal fee from your compensation amount. We can discuss how our fee structure works when you get your free consultation.

Contact Our Law Firm for Help With a Car Accident Claim

At the Law Offices of Anidjar & Levine, our goal is to make sure that the negligent party or parties who caused your accident pay you the compensation you deserve. If you have any questions about taxation and settlements, we advise you to consult an accountant. For quality representation to assist you from beginning to end, contact us today.