Are Personal Injury Settlements Taxable in Florida?

Being injured in a personal injury event is usually incredibly distressing, especially if the injuries you suffered were severe. Working through the personal injury claims process while you are hurt can be demanding and lead to additional anxiety. However, when the claims process comes to an end, and you are successful in obtaining the financial compensation you need, you are likely to feel quite relieved. As the year winds down, though, it wouldn’t be uncommon to wonder how that settlement will affect your taxes.

There can be plenty of uncertainty when you start the claims process, and until it is formally closed and you have your settlement check in your hand, it can be a rocky road. The same is true in some situations when tax time comes around. No one enjoys doing taxes, but it is an unavoidable part of life, and if you have just received your settlement check, you could be concerned about having a surprise tax bill taking a chunk out of the money you worked so hard to obtain. U.S. tax law can be complex and confusing, so knowing what to expect and how you will be impacted if you receive a personal injury settlement in Florida is essential to prepare you for what is to come. 

Taxes and Personal Injury Settlements in Florida

The good news is that Florida personal injury settlements are generally not taxable in terms of state and federal taxes. To dive into this further, there is no state income tax in Florida. With some exceptions, federal tax laws do not consider personal injury settlements as taxable income. 

With this said, it is important to understand the different elements that make up a personal injury settlement. Here is where it can get complicated. Settlements are usually made up of compensatory damages that are meant to make an injury victim “whole again” and help them recover financial losses suffered after an accident. That is, settlement money is typically not considered additional income. Still, some damages can be included in a settlement, which could potentially be taxable.

Non-Taxable Damages

If your settlement contains these damages, they are non-taxable:

• Medical expenses related to and as a result of your injury
• Compensation for pain and suffering that directly stemmed from your injury
• The lost wages you sustained as a result of your injury
• The emotional distress that was suffered related to your injury

Damages that May Be Taxable

If your settlement contains these damages, they may be taxable:

• Punitive damages
• Lost wages not directly related to your injury
• Interest that you earned on your settlement
• Emotional distress that did not directly relate to physical injuries
• Deductions for medical expenses that end up being reimbursed by your settlement

Call Fulgencio Law Today

After an injury accident and when a settlement has been reached, with the assistance of an experienced attorney, you can have the guidance necessary to structure your settlement favorably so you know how you will be impacted in terms of taxes. This can better ensure that you won’t have to worry about unforeseen tax implications down the road.

Call a Tampa personal injury attorney at Fulgencio Law at (813) 463-0123 to have your case evaluated during a free consultation.