If you’ve been hurt in a car accident in Florida, you may be entitled to financial compensation for your injuries. Often, such compensation comes in the form of a settlement. Although car accident settlements are paramount in helping victims deal with the many financial consequences of their injuries, victims often wonder whether they must pay taxes on such money. In this article, we examine the tax implications of car accident settlements in Florida.
The Tax Consequences of Car Accident Settlements
Damages you receive following a car accident are intended to compensate you for things like medical bills, pain and suffering, emotional distress, lost wages, harm to family relationships, and attorney fees. Whether the money you receive following a car accident settlement is taxable depends on the type of damages. Common damages following a car accident include:
Medical bills: Any compensation you receive due to your physical injuries isn’t taxable. This includes medical bills, whether they are for physical therapy, emergency care, follow-up visits, or nursing care. You should not be required to pay any taxes on payments you receive due to physical injuries suffered in a car accident.
Pain and suffering: Pain and suffering damages compensate car accident victims for physical and mental suffering caused by their injuries. Pain and suffering damages are not usually taxable.
Emotional distress: Although pain and suffering damages aren’t usually taxable, you may have to pay taxes on compensation received solely for emotional distress. However, if your injuries directly caused your emotional distress, then you may not face any tax consequences for these damages.
Lost wages: Lost wages compensate you for money you lost from missing work. Thus, lost wages are treated like normal, taxable income.
Reporting Your Settlement to the IRS
When determining whether you must report your car accident settlement to the IRS, one thing is certain: always seek the guidance of an experienced tax attorney and CPA. The tax laws are simply too complicated to try to navigate on your own, and the last thing you want to do is end up paying more than you should following a car accident in Florida. Of course, following a car accident, the first thing you should do is contact an experienced personal injury attorney for assistance. In addition to helping you obtain compensation for your injuries, a knowledgeable personal injury attorney can ensure that you receive assistance regarding your tax obligations.
Pensacola Car Accident Attorneys
If you’ve been hurt in a car accident in Florida, you need an experienced auto accident attorney on your side. Located in Pensacola, Florida, Staples, Ellis + Associates, P.A., has over 70 years of combined experience representing car accident victims in Northwest Florida. If you or a loved one have been hurt in a car accident in Northwest Florida, we are here to help you obtain financial compensation for your injuries. Please contact us as soon as possible to arrange a consultation.
Posted in: Auto Accidents