Receiving a financial settlement for injuries you have sustained due to another party’s negligence can provide immense relief. While a financial award cannot undo the harm you have suffered, it can make up for losses, including medical expenses and lost income. Furthermore, a personal injury settlement can provide you with a sense of justice for the pain and suffering you endured due to the accident. Are personal injury settlements taxable, though?
Because a personal injury settlement is the most significant sum of money many people will ever receive at once, they might find themselves wondering, “Are settlements taxable?” The answer to this question is not always straightforward, but understanding the tax implications of your settlement can help you feel more prepared for the future.
Is Personal Injury Compensation Taxable?
Are lawsuit settlements taxable? In most cases involving lawsuits, personal injury compensation is not taxable. According to the Internal Revenue Service (IRS), settlements for personal physical injuries or physical sickness are generally not taxable, regardless of whether you receive a lump sum or payments over time. Because personal injury settlements are intended to compensate you for your losses, the IRS does not consider them income. This means that if you receive a settlement for injuries sustained in an accident, you likely will not have to pay taxes on that money.
What Types of Compensatory Damages Are Available in Nebraska Personal Injury Claims?
In Nebraska, personal injury victims may be entitled to various types of compensatory damages, including:
- Economic damages – These cover quantifiable monetary losses such as healthcare expenses, lost wages, and property damage. This compensation also covers future medical expenses and lost earning capacity.
- Non-economic damages – This compensation covers the injured individual’s intangible losses, like emotional trauma, pain and suffering, and loss of enjoyment of life.
How much compensation you are able to obtain depends on the nature and severity of your injuries, as well as their effects on your personal and professional life. Consulting a knowledgeable Nebraska personal injury attorney can help you understand how much your claim is worth.
Does Nebraska Award Punitive Damages for Personal Injury?
Punitive damages, which are intended to punish the wrongdoer and deter similar behavior, are available in personal injury cases in some states. In jurisdictions where punitive damages are awarded, they are considered taxable income.
However, Nebraska courts have concluded that punitive damages are unconstitutional under the Nevada constitution. Personal injury settlements in our state only include compensatory damages. Therefore, no part of your settlement will be subject to taxation.
Do I Have to Report Personal Injury Settlement to the IRS?
Even though personal injury settlements are generally not taxable, you may still need to report them to the IRS. If you receive a settlement, the insurance company or the defendant might send you a 1099-MISC stating the amount you received. You should provide this form to your tax preparer or include it with your tax return. However, as long as your settlement is for personal physical injuries or physical sickness, you will not need to pay taxes on the amount received. What happens if I don’t get a 1099 for a settlement? Your settlement agreement can be taxed based on the amount you received.
What Type of Settlement Is Not Taxable?
Personal injury claims take many forms. If your case is successful, you will not be responsible for paying taxes on any part of your compensatory award. This includes compensation for cases such as:
- Car accidents
- Truck accidents
- Motorcycle accidents
- Uber/Lyft accidents
- Pedestrian accidents
- Bicycle accidents
- Slip-and-fall accidents
- Product liability
- Medical Malpractice
- Workers’ compensation
Contact an Experienced Nebraska Personal Injury Attorney Today
What is the average payout for a personal injury claim USA? Nebraskans who suffer injuries due to another party’s negligence often have too many things to worry about. Between the excruciating pain, missed time at work, medical bills, emotional repercussions, and tax code implications, life after an accident can feel overwhelming. However, it is worth remembering that professional help is available. Working with a skilled and knowledgeable Omaha personal injury attorney can allow you to access the help you need while you focus on your healing process.
The experienced personal injury lawyers at Mueller Schmidt Mulholland & Cooling have nearly 60 years of combined experience helping injured individuals with every aspect of their claims. Let our law firm fight for the compensation you deserve so that you can move forward with dignity. Call us today at 402-999-9000 or contact us via our online form for a free consultation to learn more about how we can stand up for your rights. We won’t charge you any legal fees for any portion of your settlement as we work on a contingency fee basis.
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