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The Tax Ramifications Associated with Personal Injury

Charlotte Personal Injury Attorney Matt Arnold answers the question: “The insurance adjuster is saying I am partially negligent what does that mean?”

 

Everyone must pay taxes on their income. The United States Tax Code is set up so that every person working in the United States pays a portion of federal income tax. There are many distinctions made within the Code that define what is income and what is not income. Everyone always thinks of tax implications and ramifications for employment income, but what about the income one receives in a personal injury suit? Is that taxed as income? Does only a partial amount of the reward get taxed? President Trump’s tax changes have altered prior tax law regarding the handling of personal injury settlements.

 

Pay-taxes-Charlotte-Lake-Norman-Monroe-Personal-Injury-Law-Firm-300x225Personal injury cases involve an injury and/or damages to an individual that are caused by the negligence or wrongdoing of another. Awards in personal injury suits are meant to compensate a victim for the damages incurred because of the injury. There are different types of damages available in a personal injury suit, compensatory damages and punitive damages. Compensatory damages are for the injury that results because of an accident. Punitive damages aim to punish a defendant or responsible party for their wrongdoing or negligence while deterring others from committing the same offense or negligence. Previously, compensatory damages were completely tax free and punitive damages were subject to tax rates. Changes in tax law affect the way that compensatory damages will be treated, according to Forbes.

 

In order to be treated as tax free income under Trump’s tax changes, compensatory damages must be physical damages or injuries. What constitutes a physical injury is up for debate. For example, making a claim that the defendant’s negligence broke a bone, or caused you to be physically sick are clearly physical injuries. The physicality of them make the injury tax free. Not every situation is clear, however. In some personal injury cases, there are claims of emotional distress or other seemingly “non physical” injuries. If emotional distress manifests itself in physical symptoms, those physical injuries are likely not tax free. Similarly, physical injuries can also result in emotional distress, but the emotional distress claims might not be tax free.

 

The changes in the tax code are confusing. There will be a period of time when distinctions and clarifications are made, but for the time being this is what needs to be considered in personal injury cases. Do not let these tax changes deter you from seeking the compensation to which you are entitled.

 

The dedicated personal injury attorneys at Arnold & Smith, PLLC are here to help you with all of your personal injury needs. We know that an injury can cause devastating results in your life. Whether the injury is physical or emotions, you should receive compensation for your damages. Our attorneys understand this and will fight for your compensation. We know that personal injury awards can help you rebuild your life after an injury and will use every resource available to present the best case possible. Now taking cases throughout the Charlotte region with offices in Uptown Charlotte, Mooresville and the new location under renovation in Monroe. Contact us, for a free consultation, call us at 704-370-2828 or click here for additional resources.

 

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The skilled personal injury attorneys at Arnold & Smith, PLLC are dedicated to maximizing the financial recovery and obtaining justice for every personal injury client injured by another party’s negligence. The issues our personal injury clients may be facing include, but are not limited to, slip and fall injuries, wrongful death, product liability, catastrophic injuries, dog bite claims, car and truck accident injuries, motorcycle injuries, traumatic brain injury (TBI), nursing home negligence, spinal cord injury, boating accidents, and defective medical device injury. Our personal injury attorneys understand the devastating impact such an injury can have on a person’s life, and that the effects so often go beyond physical pain and suffering. The personal injury attorneys at Arnold & Smith, PLLC are dedicated to helping clients determine the strength of their claims, and to aggressively pursuing the means necessary to achieve the best possible end result for each client’s particular situation.

 

Source:

https://www.congress.gov/bill/115th-congress/house-bill/1

https://www.forbes.com/sites/robertwood/2018/08/06/trump-tax-law-hurts-injury-suit-settlements/#b027e1622c6d

 

 

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https://www.freeimages.com/photo/pay-taxes-1445374

 

 

See Our Related Video from our YouTube channel:

https://www.youtube.com/user/ArnoldSmithPLLC/videos

 

 

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