Do You Need To Pay Taxes On A Florida Personal Injury Settlement?
If you were injured in a Florida accident, and received a settlement as a result of a personal injury lawsuit, you may be wondering if you have to pay taxes on the monetary settlement. There are different types of damages, and if you will need to pay taxes or not will depend on what types of damages you received.
Moving forward with a personal injury claim or lawsuit can be complicated. Thankfully, there are Miami personal injury lawyers who can guide you through the process, connecting you with the outcome you need to move past the injurious incident. In addition to legal advice, your lawyer can let you know if it would be beneficial for you to consult with a tax professional or financial advisor to determine the tax implications of your settlement.
An Overview of Damage Types
Each accident recovery situation has its own details to analyze, but there are general personal injury settlement types and rules about when those damages are taxed.
- If your recovery amount includes compensation for lost wages or income, this amount is considered taxable income. As a result, you must report this sum on your tax return.
- Also, when interest on a settlement amount is received, this interest is also considered taxable income. On your tax return, this monetary interest needs to be reported.
- If your settlement is monetary compensation for physical injury or illness, this amount is not considered taxable income. Because it is a type of non-taxable damage, it does not have to be reported on your tax return.
- And if you receive recovery for emotional distress, this amount is also not considered taxable income. So, just as you don’t report monetary damages for physical injuries, you wouldn’t report emotional distress damages either.
- When it comes to compensation for medical expenses, if you are able to deduct these expenses from your taxable income will depend on the total expense amount and your personal income. Typically, if the medical expenses exceed 7.5% of your adjusted gross income they can be deducted.
- A way to hold the defendant accountable, as a form of punishment, punitive damages are considered taxable income. When you file your taxes, punitive damages need to be included on your tax return.
Understanding what type of damages you are receiving within your settlement can help you to determine if you need to report every part of your settlement amount or a portion of the funds received. It is important to be in compliance with all tax laws.
Who pays for taxes connected to personal injury compensation amounts? If you believe you will be receiving a personal injury settlement, talk to professionals who have the answers you need. The attorneys at Spencer Morgan Law will carefully listen to your story and fight for a full and fair recovery amount. Additionally, attorneys also work with tax professionals and financial advisors whose professional guidance can be accessed. Call 305-423-3800 now for a no-cost, confidential assessment.