Some damages recovered in a personal injury settlement in Jacksonville, FL, are taxable, while others are not. Compensation covering medical bills and pain and suffering related to a physical injury is not typically taxable. However, other forms of pain and suffering, compensation for lost income (treated similarly to actual income), punitive damages, and interest included in a settlement may be taxable.
A Jacksonville personal injury lawyer from our team can provide a personalized breakdown of your potential personal injury settlement. They will not only address tax concerns but also the losses your settlement should cover.
Here is Why it’s Important to Understand Whether a Personal Injury Settlement is Taxable
Taxes are never fun to discuss, but understanding the tax implications of your settlement is critical. There is no exception to this rule when talking about a potential personal injury settlement because:
- Tax-related concerns can affect how much money you should pursue: The amount of taxes you may have to pay on a settlement could affect your overall strategy. It is an important consideration, even if it does not affect how much money your attorney seeks.
- Understanding taxes helps you know how much money you’ll actually receive: A personal injury settlement should cover not just current damages but future economic and noneconomic losses. As you plan for the future, you must understand the amount of money you can access after paying taxes.
- Compliance with tax authorities is always wise: It is always smart to be in good standing with the tax man. Understanding what taxes they will (or won’t) take from a personal injury settlement is essential to compliance.
- You deserve to receive as much money as possible: Just as a good accountant allows their client to retain as much compensation as possible, a personal injury attorney who understands settlement-specific taxes could help you keep as much of your settlement as possible.
Awareness is important even if you cannot adjust how much taxes you pay on a personal injury settlement. An attorney will ensure you understand all the tax implications of a personal injury settlement and that you’re in the best possible position for a financial recovery post-settlement.
What Portion of My Personal Injury Settlement is Taxable?
Suppose you sustained injuries in a car crash in Jacksonville. When a lawyer evaluates your settlement and determines taxability, they will explain that:
- Compensation for medical bills, including hospital stays, physical therapy, medication, and mental health treatment, is typically tax-free—although if you took a deduction for these expenses on your most recent tax return, any reimbursement could be taxed.
- Compensation for lost income, such as wages or benefits, is taxable (just as if you’d earned the money on the job).
- The Internal Revenue Service (IRS) does not tax compensation for noneconomic damages like pain and suffering or repair bills for property damaged in an accident.
- Finally, the IRS will tax any punitive damages you receive for intentional misconduct or gross negligence.
A Personal Injury Case Requires Extensive Documentation—and Not Just for Taxation Reasons
When you prepare for potential taxes, you will want extensive documentation, which is vital to any successful personal injury case. Attorneys understand the importance of documentation, and one can help you by:
- Detailing all your damages: Anyone seeking compensation via a personal injury settlement must prove their losses. Your lawyer will obtain financial reports, medical records, expert testimony, and other documentation proving your losses.
- Providing documentation for taxable damages in particular: Your lawyer will understand which damages may be subject to taxation. They will secure and organize records to assist your accountant when preparing your tax return.
- Ensuring you’re ready for any scrutiny that comes your way: Finally, an attorney will work to put you in a solid position if the IRS audits you or otherwise scrutinizes your return to determine whether you owe any taxes on your settlement.
Attorneys are thorough when they mind the details of your case. Whether you ultimately pay taxes on a personal injury settlement, a lawyer’s capacity to document your damages will be immensely valuable to you and your claim.
Focus on Fair Compensation Before You Worry About Taxes on a Personal Injury Settlement
Taxation of your settlement is a meaningful conversation. However, more important is securing a settlement (or verdict) in the first place.
Consult a personal injury attorney about how to secure the money you deserve. A lawyer will fight for your financial recovery and serve your case by:
- Documenting your economic and noneconomic damages
- Proving (with objective and subjective evidence) who is to blame for your losses
- Leading all communication with the at-fault parties and their representatives
- Negotiating a settlement that adequately covers all your losses
- Leading all necessary legal proceedings
- Advising and protecting you from liable parties
Your lawyer will be responsible for your case and do the fighting, so you don’t have to. Their assistance and advice will be priceless, so accept their help.
Recoverable Damages a Fair Personal Injury Settlement in Jacksonville Should Cover
Each personal injury case results in victims sustaining different damages, including the following:
- Medical costs
- Pain and suffering
- Lost income
- Diminished earning capacity
- Emotional trauma
Your lawyer will review your damages and clarify how much compensation you deserve, any tax considerations that come with those damages, and every other detail regarding your case.
Call The Law Offices of Anidjar & Levine Today for Your Free Consultation About Hiring a Jacksonville Personal Injury Attorney
The Law Offices of Anidjar & Levine will help you take back control of your life. We have delivered results for injured Floridians since 2005, and our experience is an asset you can trust. We can explain what parts of your personal injury settlement in Jacksonville are taxable and help you plan accordingly.
Call our team today to discuss hiring a Jacksonville personal injury attorney.
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