QUESTION
Do you have to pay any sort of taxes on a personal injury award? How?
Asked on Aug 10th, 2015 on Personal Injury - Montana
More details to this question:
My mother has been informed that she does not have to pay taxes, but we would like verification. My mother was awarded a personal injury amount under $20,000. She is retired and was wondering if she needs to pay taxes on this lump sum?
12 ANSWERS
Bankruptcy Attorney serving Madison, WI
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Richard B. Jacobson & Associates, LLC
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I believe I answered this same question about half an hour ago. Neither the law nor the advice have changed.
Answered on Aug 11th, 2015 at 6:33 PM
Edwin K. Niles
Unless part of the settlement is for loss of earnings, there are no tax consequences.
Answered on Aug 11th, 2015 at 6:23 PM
Chapter 7 Bankruptcy Attorney serving Syracuse, NY
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Andrew T. Velonis, P.C.
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No, she does not have to pay taxes, it is not income, it is comensation for a loss. She doesn't even report it. Look at it this way: suppose someone crunches up the fender of your car and the insurance company pays $500 to get it fixd. That's not income because all you got was the fender restored to the condition it was in before. Same thing here: your mother has pain and suffering and now 20G to offset it.
Answered on Aug 11th, 2015 at 7:56 AM
James Eugene Hasser
Generally speaking the injury part of the award in not taxable, but you need to consult the lawyers that got you the award and you may also want to consult your accountant and maybe even a tax lawyer. Good luck.
Answered on Aug 11th, 2015 at 4:14 AM
Auto Attorney serving Bloomfield Hills, MI
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Gregory M. Janks, P.C.
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Generally personal injury recoveries are non-taxable, but there can be exceptions depending on if there was some type of recovery for economic damages, such as wage loss, etc. It is best to review the Release that the defendants sent to allow the settlement and show same to a tax professional/CPA to get specific advice on the specific case.
Answered on Aug 11th, 2015 at 4:14 AM
1 Award
Personal injury recoveries are generally not taxable. The person you mother spoke with was correct.
Answered on Aug 11th, 2015 at 4:13 AM
Commercial & Bankruptcy Law Attorney serving Powell, OH
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Ronald K. Nims
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The portion of a personal injury award that compensates for pain and suffering and loss of bodily function and reimburement of expenses (doctor bills, etc.) is always tax free. If any portion is for damage/loss to property (say your car was damaged), that can be taxable as a sale of the property. Since the payment is usually less than you paid for the car, there is no gain on the sale, also if you replaced the property, it's probably tax free. If any portion is for lost income or punitive damages, that is always taxable income.
Answered on Aug 10th, 2015 at 7:38 PM
Monica Cecilia Castillo-Barraza
It depends on how the Settlement Agreement and/or possibly the check itself are worded. You should consult with a local attorney and/or CPA.
Answered on Aug 10th, 2015 at 6:35 PM
Automobile Negligence Attorney serving Orlando, FL
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Kelaher Law Offices, P.A.
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A personal injury settlement is not considered taxable income for purposes of federal income tax.
Answered on Aug 10th, 2015 at 5:16 PM
Personal Injury Attorney serving Pasadena, CA
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Law Offices of Pius Joseph
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This is an accountant question. However, if the recovery is compensating only personal injury damages, it is not taxable. However, if any component of the claim technically is compensation for loss of income, it may be taxable.
Answered on Aug 10th, 2015 at 4:57 PM
Ronald A. Steinberg
Not usually. The money is to reimburse for the loss due to the injury, and you are only taxed on gains.
Answered on Aug 10th, 2015 at 4:33 PM
Plaintiff Animal Bites Attorney serving Missoula, MT
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Bulman Law Associates PLLC
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Get your lawyer to put the no taxes promise in writing and guarantee that he/she will pay any taxes owed to anyone.
Answered on Aug 10th, 2015 at 4:30 PM