How Do Taxes Work for Personal Injury Compensation?
Many people considering pursuing financial compensation through an injury lawsuit may be unsure how much compensation can help their financial situation. Considering that the amount of compensation available in a case may change depending on various factors, a claimant may also want to know whether they could lose money for compensation through taxes. However, taxes aren’t collected on most of a person’s awards when they receive compensation. This means that a successful case may result in a significant amount of compensation with no loss to the government for the claimant.
If you’ve been injured because of someone else’s negligence and aren’t sure about your rights and options when considering legal action, we can answer any questions and address any concerns you may have. To learn more about our full range of legal services and assistance, contact a New York City personal injury lawyer of Hach & Rose, LLP today at (212) 779-0057.
Rules on Taxes with Personal Injury Compensation
According to the federal government, compensation income isn’t treated in the same way as traditional income regarding taxes. Unlike normal forms of income, financial compensation won through a personal injury lawsuit isn’t usually taxed. This allows anyone who wins compensation for their injuries and suffering to get the money in full. However, there are the following exceptions to this tax rule:
- Interest gathered on compensation may be taxed
- Punitive compensation may be taxed
- Forms of injury compensation such as slander or libel compensation may be taxed.
- Compensation paid for lost wages may be taxed.
Depending on your award and the compensation, this may or may not have a great effect on your award.
An injury may leave you with financial burdens that can be difficult to overcome. However, compensation may be available through a personal injury claim. To learn more about pursuing compensation, contact a New York personal injury attorney of Hach & Rose, LLP by calling (212) 779-0057 today.