Do I Have To Pay Taxes on My Florida Personal Injury Award?
Anytime a personal injury victim accepts a settlement award from a claim, that financial compensation is generally not taxable by the state or federal governments. In order for their settlement award to be non-taxable, however, their losses must have been caused by an illness or a physical injury.
What Part of Your Compensation Award Is Nontaxable?
Any financial compensation that is awarded for losses that are the result of an illness or physical injury is non-taxable by the government. This law applies no matter if your attorney negotiated your settlement without going to court or you were given a verdict at the outcome of a jury trial.
Some examples of financial compensation that are non-taxable include:
- Medical costs like in-patient hospitalizations, surgical procedures, and physical rehabilitation
- Loss of consortium
- Emotional trauma caused by any chronic pain that stems from your injury
- Your attorney fees
Are There Any Exceptions to the IRS Rule?
There are a few exceptions that pertain to financial compensation granted for a personal injury claim. This means that you might be taxed on specific parts of your settlement. The Internal Revenue Service has very particular rules that outline which portions, if any, of your personal injury award are taxable. These rules include:
The government is not concerned with who pays your income. Whether you are able-bodied and collecting a regular paycheck, or you have recovered lost income via a personal injury settlement for a period where you were unable to work, your income is taxable and must be reported on your yearly tax return. Keep in mind that the federal government will already have the details regarding your settlement because insurance companies are required to submit a 1099 form to the Internal Revenue Service about any financial compensation you were awarded.
Due to the fact that it could take months or possibly even years to resolve your personal injury claim, settlements frequently involve interest granted to the victim. Any interest that is given to you stemming from your award is also taxable and has to be declared as income.
There are some personal injury lawsuits that do not have anything to do with illnesses or physical injuries, like workplace discrimination, wrongful termination, and defamation of character lawsuits. In these instances, financial compensation can be awarded solely for any mental anguish or emotional distress that might be caused by this kind of traumatic experience. Under these circumstances, since the settlement did not originate from an illness or physical injury, any financial compensation that is awarded is considered taxable.
Although they are hardly ever awarded, punitive damages are designed to be a punishment for the liable party and are intended to deter the behavior from happening again. Punitive damages are taxable 100% of the time. It makes no difference whether or not the claim involved an illness or a physical injury.
The Tampa personal injury attorneys at Fulgencio Law can explain what parts of your Florida personal injury settlement are able to be taxed and inform you of any significant exceptions that you should be aware of.
If you or a family member have been injured in a Florida personal injury accident that was caused by another person’s carelessness, we urge you to schedule an appointment for a free, no-obligation consultation with a member of our Tampa personal injury team by calling (813) 463-0123 so that we can review your case and whether or not you have a legitimate personal injury claim.