Do You Have to Pay Taxes on Personal Injury Settlements in Philadelphia?
The majority of the work is completed once you resolve a personal injury case. You should receive a fair settlement amount from an insurance company, but you must not forget about possible taxes related to your personal injury settlement.
It is important for you to speak with an attorney about the possible tax liability you may have on a personal injury settlement. The attorneys at Mattiacci, Law LLC can help you understand if any tax laws will apply to your personal injury settlement. Contact us today at 215-709-7915 to discuss any questions you have related to taxes and your personal injury settlement.
The IRS Doesn’t Tax the Majority of Personal Injury Settlements in Philadelphia
The Internal Revenue Service governs the taxes related to personal injury settlements and jury verdicts obtained from lawsuits. In general, the federal government will not tax settlements received for illnesses or physical injuries.
Money paid for general damages such as pain and suffering, as well as emotional trauma, is not taxable because it compensates the victim for a loss. The general damages award is given to the injured victim to make them whole again. The injured victim did not gain anything but is simply being made whole after suffering personal injuries.
The settlement amount is not categorized as income for federal tax purposes. You generally will not pay federal taxes on your personal injury settlement amount. But this rule only applies if you did not list your medical expenses caused by the injury as itemized deductions during a previous tax year. If you did list these expenses as itemized deductions, then you will owe federal taxes on the portion of your personal injury settlement related to these medical expenses.
Exceptions to the General Rule
Settlements awarded for nonphysical losses such as mental anguish and emotional distress may be subject to taxation. If you received a settlement for only non-economic damages. Under federal tax law, the proceeds received for non-economic losses related to physical injuries or illness are not taxed. But if you didn’t suffer physical injury and you received a settlement for only non-economic damages, then you would pay federal taxes on the settlement amount.
If you have questions regarding your personal injury settlement amount and possible federal or state taxes, contact Mattiacci, Law LLC today to schedule a free consultation during which we can discuss your settlement amount and any relevant tax liability. Call our office at 215-709-7915 if you are seeking a Philadelphia personal injury lawyer who can answer questions about your settlement and the tax implications related to the settlement.
You may have to pay federal taxes on the part of your settlement you received for lost wages in a case related to employment. This part of the settlement award is categorized as taxable wages. Also, if you receive interest on a settlement award, then lost wages are taxable as interest income. If you were awarded punitive damages, these would be taxed by the federal government even if they were awarded for illness or physical injury.
Can a Personal Injury Attorney in Philadelphia Help Me With Taxes Related to My Personal Injury Settlement?
Tax laws can be confusing, contradictory, and difficult to understand. However, tax laws can become even more mystifying when they are applied to personal injury settlements. If you are still recovering from your injuries, it is advisable for you to have a skilled attorney handle any tax issues that relate to your personal injury settlement.
A personal injury attorney can consult other tax attorneys who specialize in this area of law if your questions relate to unusual areas of the law. The attorneys at Mattiacci Law, LLC can offer you guidance on how to deal with any tax issues related to your personal injury settlement.
Contact Mattiacci Law, LLC Today to Schedule a Free Consultation
You can make sure that you are not paying too much taxes on a personal injury settlement by hiring a personal injury attorney who has experience handling these types of legal questions. Mattiacci Law, LLC is here to help you if you need to resolve any tax issues related to your personal injury settlement.
Contact Mattiacci Law, LLC today at 215-709-7915 to schedule a free consultation during which we can discuss your personal injury case, the settlement you received, and any tax issues that you want to address.