Do You Have to Pay Taxes on Your Personal Injury Settlement?

If you’ve suffered a serious personal injury, paying taxes is probably the last thing on your mind. However, with tax season coming up, you need to be prepared. If you’ve received a settlement for a personal injury, you might be responsible for paying taxes on a portion of the settlement.

Some Personal Injury Compensation Cannot be Taxed

Money you received for repairing your vehicle or property is not taxable. This money is not subject to taxation, as it is intended to replace the value of the asset you lost. The same goes for compensatory and general damages. These are the funds you receive to pay for medical expenses. Any amount of the settlement designated for pain, suffering and physical harm is not subject to taxation.

Mental Anguish Settlement Subject to Taxation

Where you will run into tax responsibility is money allocated for mental anguish. The IRS will tax this portion of your settlement, as this money is not associated with any physical injuries you sustained. However, if you use funds to pay for a psychiatrist, the money used for treatment is not taxable.

“Recovering from a personal injury is difficult enough without having to worry about paying taxes. If you have been injured, our team is standing by to help you navigate the legal process,” said Attorney Walter Clark, founder of Walter Clark Legal Group.

Our firm has been handling personal injury cases throughout the California Low Desert and High Desert communities for over 30 years. With a 95% success rate, the California personal injury attorneys at Walter Clark Legal Group will fight to hold those responsible for your loss accountable and win compensation to cover medical bills, lost wages, and pain and suffering. If you have been injured and want to discuss your legal options, contact us today for a free consultation with an experienced personal injury lawyer. We have offices in Indio, Rancho Mirage, Victorville, and Yucca Valley and represent clients through the entire California Low Desert and High Desert communities.

DISCLAIMER: The Walter Clark Legal Group blog is intended for general information purposes only and is not intended as legal or medical advice. References to laws are based on general legal practices and vary by location. Information reported comes from secondary news sources. We do handle these types of cases, but whether or not the individuals and/or loved ones involved in these accidents choose to be represented by a law firm is a personal choice we respect. Should you find any of the information incorrect, we welcome you to contact us with corrections.

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