Tax On A Vehicle Accident Settlement Or Judgment?
It is always a strong feeling of relief once you have obtained a settlement or judgment following a motor vehicle accident in Birmingham. It may seem like a lifetime since the accident actually took place but now you can finally move on with your life knowing your compensation is on its way.
But even though you have obtained a settlement or judgment, there are bound to be questions about it still lingering in your head. One of the more popular questions when it comes to settlements or judgments is: Do I need to pay tax on a vehicle accident settlement or judgment?
The quick and simple answer is that most vehicle accident settlements or judgments will not require you to pay tax. But of course, that is not always true for every situation. In the end, it depends on the circumstances of your settlement or judgment.
For starters, when it comes to the compensation you may receive for vehicle damage from a car accident, it is not taxable. This also applies to the money spent on repairs and reimbursement you might have received to use toward a rental vehicle in the meantime.
When it comes down to it, the majority of money from settlements or judgments are for compensatory and general damages. These are typically for your physical injuries and medical expenses, which are mostly not subject to taxes. This is because these types of settlements and judgments are meant to reimburse you for the money you spent out-of-pocket.
However, if your settlement or judgment includes compensation for lost income, then that will be taxable. This is basically because if you had received those lost wages regularly, they would have been taxable. Since you are being reimbursed for those lost wages due to your injury, they are subject to tax as well.
In rare situations, i.e., the defendant engaged in particularly egregious behavior, punitive damages are included as part of the vehicle accident settlement or judgment. These punitive damages, designed to deter future bad behavior on the part of the defendant, are almost always taxable.
If you are dealing with an upcoming settlement or judgment following a vehicle accident and you have questions, then you should contact an experienced attorney like those at Salter Ferguson, LLC in Birmingham. With over 30 years of legal experience with car accident litigation, they can help you get all the necessary information you need.
To set up a consultation today call 877-298-4878.
The articles on this blog are for informative purposes only and are no substitute for legal advice or an attorney/client relationship. If you are seeking legal advice, please contact our law firm directly.