Are Car Accident Case Settlements Taxable?
Many times car accident claims result in settlements to injured parties. This money is intended to make the claimant whole again. Of course, that is not possible, but the system is designed with this goal in mind.
These settlements often provide compensation for lost wages, loss of earning capacity, pain and suffering, payment for outstanding medical bills, etc. But is this money taxable? As is the case with workers compensation cases, the answer is no, but there are some exceptions.
The position taken by the IRS is that any compensation you receive for personal injury or illness is not considered taxable income. One exception is for punitive damages, which the IRS considers to be taxable income to the person or company that receives it. Another exception is if on a prior tax return you claimed a deduction for medical expenses related to the accident, and you receive a settlement, then you may be subjected to taxes on such money. Additionally, if the settlement of a personal injury claim contains a confidentiality clause, then such monies may be considered to be income by the IRS.
Boston Car Accident Attorney
If you find yourself needing a car accident attorney located in Boston, we encourage you to call us today for your free, no-obligation consultation. We only get paid if we win your case!