You’ve gotten a personal injury settlement in Ohio. Although it’s terrible to suffer a personal injury, it’s nice to receive some financial compensation that makes up for your suffering, bills, lost wages, and a whole host of other issues. Tax time is coming up. Hopefully your settlement has made all the difference in paying your bills; but with tax deadlines looming, you’re probably wondering if you have to set aside some money to pay the IRS.
Do you have to pay taxes on a personal injury settlement? Generally, no. However, there are some exceptions, so read on.
Compensation for Physical Injury
If you have won a settlement for a physical injury, you do not have to pay taxes on the settlement amount. That is considered compensation for medical bills, emotional distress and other issues. If you had been well, you would have been able to pay taxes on a normal basis. Since you have been removed from the workforce (or whatever your attorney has argued), you cannot. Therefore, that settlement is not taxable. You do need to count the amount which you deducted in previous years. If you didn’t make an itemized deduction for medical expenses, however, the full amount is non-taxable.
Exceptions to the Rule
Unfortunately, if you won punitive damages—that is, damages to punish a person or entity for their egregious conduct—you will have to pay taxes on that money. If you get punitive damages, your lawyer should ask the judge to separate the judgment between compensatory damages (that is, those which pay your bills versus those that are meant to punish the defendant) and any other type.
If you received money to account for lost wages, that, too, is taxable. Pure emotional injury suits are also taxable, if there’s no physical injury to account for.
You may also have to pay taxes on the interest from the judgement. If a defendant ends up liable, the interest on the settlement begins accruing from the date the lawsuit was filed.
Your attorney should be able to help you ensure that your settlement is as non-taxable as possible. Depending on why you’re receiving the compensation, they can ask the judge to bifurcate the taxable and non-taxable expenses. However, you should still meet with an accountant to accurately gauge how much you owe to the IRS.
Contact an Ohio Attorney Today
If you’ve been injured thanks to someone else’s negligence, you don’t have to struggle to pay your medical bills and other costs. Work with an attorney to make sure that you get the help you need. I can help you recover compensation for your injuries. I’ll Make Them Pay!® Call me today at 877.944.4373 for a consultation.