There is a saying that the only two things in life you cannot avoid are death and taxes. As a part of living in this country, you have a responsibility to pay your taxes; however, you should not pay any more in taxes than required by law. If you have been injured in a motor vehicle accident, you probably will rely on a personal injury lawyer to make sure your rights are defended. The purpose of your personal injury settlement has to cover the cost of your medical expenses, replace any property that may have been lost, and make you financially whole again. When your check hits the bank account, you may be wondering if you have to pay taxes on this money.
First, understand that if you have questions or concerns about taxes, you should reach out to a tax attorney or tax professional who can help you. At the same time, you probably will not have to pay taxes on the money you receive from your personal injury settlement. If your money is being used to cover medical bills, physical injuries, and property damage, then you should not have to pay taxes on it. On the other hand, if you are receiving money due to emotional damages, then you may have to pay taxes on that amount. Furthermore, if you are awarded money for punitive, then you may have to pay money on this as well.
Finally, if you receive money that is designed to replace income due to lost wages, then you probably will not have to pay taxes on this. It depends on how the settlement is worded, which is why you need to rely on the help of a personal injury professional. In the vast majority of car accidents, you will probably not receive money for emotional damages. Therefore, there is a low chance you will have to pay taxes on the settlement you receive. At the same time, you do need to work with a trained tax professional if you have specific questions or concerns about your settlement award. That way, you do not find yourself in the crosshairs of the IRS. Reach out to a trained tax adviser to learn more.