Personal Injury Settlement and Taxes in New York
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If you’re entering into a personal injury lawsuit in New York City, you’re probably going to seek compensation for lost wages, medical bills, pain and suffering, and emotional distress. But as you work to figure out how much money you should seek on each of these claims, you’ll want to account for whether or not it will be taxed.
So, how do you know if your settlement is subject to taxation?
When your New York City personal injury settlement isn’t taxable
Whether or not your settlement money will be subject to taxes depends on what the compensation aims to cover. For the most part, a settlement from a personal injury case will be used to cover the lost wages, medical bills, pain and suffering, and attorney fees for someone who has sustained an injury at the fault of another individual.
When a settlement comes from a physical injury, the money received will not be subject to taxation. This means that the majority of personal injury settlements created on a basis of a physical injury will not be taxed before you receive the cash.
But, there are some exceptions.
When your personal injury settlement is taxable
When you sue someone for a personal injury in Brooklyn, you are probably going to make more than one claim. While the claims surrounding the damages from the physical injury may not be subject to taxes, there may be certain damages that do not involve the physical injury and will therefore be taxed. Here are a few of the taxable damages:
- Breach of Contract – If a breach of contract caused the injury, your damages may be taxed.
- Punitive Damages – Any punitive damages involved in the case will be subject to taxation.
- Judgment – If interest is added on to your verdict, any interest you receive on the judgment money will be subject to taxes.
- Emotional Injury – If the case is based on an emotional injury and not a physical injury, the settlement will be taxed.
Whether or not your case makes it to a verdict will not influence what money is taxed and what is not. If you should come to an agreement before or during your trial, the same rules will apply.
If you’re in need of legal representation for a personal injury lawsuit and you live in the greater New York City area, contact the law office of Held & Hines LLP.
Posted in: Personal Injury
