Will I Have to Pay Taxes on My Personal Injury Settlement?

After you’re injured in an accident, you need compensation to cover your losses. You maybe have even started filling out the paperwork and preparing for your day in court. But how could taxes affect your claim. Will you have to pay taxes on your personal injury settlement? 

The answer can be a little complicated. Although your whole settlement may not be taxed, parts of your settlement can be. Because of this, you may need to speak with your personal injury lawyer in Rockford about your settlement and how you can protect it. Taxes can take a big cut of your settlement if you’re not careful, so reach out for guidance regarding your claim. 

Damages for Injuries Aren’t Taxable 

When you’re hurt in an accident, you need your settlement to regain your health. Because of this, the majority of the settlement funds you receive for a Rockford personal injury claim will go to paying off your hospital bills, repairing your car, and covering your wages for the time you’re unable to work. 

Because of this, the IRS doesn’t tax the compensation you receive for physical injuries and illnesses. If you didn’t take an itemized deduction for these expenses, you can receive the full amount without worrying about including them on your taxes. 

That makes it easier for you to focus on your financial recovery. When you know you don’t have to worry about your bills being taxed, you can focus on wiping away any debts that accrue because of your injuries. 

Certain Damages Can Be Taxed 

But just because you don’t have to worry about your medical bills being taxed doesn’t mean your settlement will be tax-free. You may instead face taxes on other parts of your settlement or compensation. 

For example, let’s say the person who hurt you was acting recklessly or intentionally hurt you. You may be due punitive damages because they were acting so carelessly. But these damages can be taxed. You’ll list it as other income on your taxes. 

That makes getting compensated and understanding your claim more complicated. Some parts of your damages may not be taxed, but how do you know which ones will be? And how do you maximize your compensation when you account for taxes? 

Contact a Lawyer on Your Settlement Taxes 

When you’re hurt in a serious accident, your claim doesn’t end when you’ve gotten your compensation. You may still need a Rockford lawyer from Mahoney & Mahoney, LLC to help you with your claim. Your lawyer can guide you through your compensation’s impact on your taxes. They can also represent you in court and help you calculate your losses. That way, you can maximize the compensation you’re due. 

Worried about the impact of your taxes on your Illinois personal injury compensation? A Rockford personal injury lawyer can discuss these concerns about your taxes over a free consultation. To take advantage of your consultation, call 815-656-4600 or complete the online contact form below.