Personal injuries are often life-changing in some sense. Whether the event that caused the injury you or a loved one is suffering through was catastrophic or seemingly minor, you still deserve protection and help after a life-altering accident.
But once you win a settlement, you're now in possession of a large lump sum of money. Have you ever wondered if this is considered taxable income and what you should do to make sure you stay on the right side of the law?
My name is Chris Parks, and I've been a personal injury attorney for over 30 years. During that time, I've helped the victims of accidents retrieve over $100 million from personal injury claims, and many of them have asked me the same question: "Do I owe income tax on my settlement award?"
The answer is generally no, but each case is unique. However, there are a few resources you can use that will point you in the right direction.
But before I start, I want to clarify that I am not a tax lawyer or CPA, and nothing in this blog should be taken as tax advice. In my own contracts, I state that my clients should get tax advice from tax professionals, simply because tax law is always changing.
Here are some resources you can use to learn more about the tax status of settlements.
The first resource I would advise using is the following Settlements Taxability PDF from the Internal Revenue Service (IRS).
This is a great resource because it comes directly from the IRS, and they are very good about updating its documentation regularly so that you can easily stay informed.
This second link is another great resource that you can use to learn whether or not your personal injury settlement may be taxable.
As I mentioned earlier, I put in my own contracts that I do not give tax advice to my clients. If you have recently received a settlement and have questions about what taxes you owe, you need to speak to a CPA or tax attorney to answer questions related to your specific situation.
If you have recently suffered some sort of personal injury and have questions about your case, feel free to give me a call at (720) 805-1193. I offer free personal injury consultations. It doesn't cost anything to talk to me over the phone and I would be happy to hear from you.