Will I Pay Taxes On My Car Accident Settlement In Florida?
If you were injured in a Florida car accident because of another party’s negligence and are considering pursuing compensation, you may be wondering if you will pay taxes on your car accident settlement. You may be worried that taxes will consume the settlement you will recover.
So, will you pay taxes on your Florida car accident settlement? Like many other areas of law, the answer to this question varies. This article discusses tax issues that apply to your Florida car accident settlement.
What You Need To Know About Car Accident Settlements and Taxes in Florida
There are many things to consider before determining whether or not your Florida car accident settlement will be taxed. Generally, any monetary compensation you recover for losses resulting from a physical injury is not taxable. This is true regardless of whether you receive a settlement out of court or a court verdict. This means specific parts of a car accident settlement are taxable. The Internal Revenue Service (IRS) has specific rules that outline which parts of a car accident settlement or award are taxable.
The following are some examples of financial compensation that are non-taxable;
- Medical expenses – These include costs for emergency care, physical therapy, and physical rehabilitation. However, it is vital to note that if you itemize deductions for medical expenses related to your injury, you are required to report the itemized deductions as income on your tax return for the year you receive the money.
- Compensation for emotional trauma which originates from chronic pain that stems from a physical injury
- Your attorney fees
Loss of consortium is also non-taxable. Most loss of consortium claims in Florida are filed by victims’ spouses. However, a loss of consortium claim can also be brought by a child, parent, or another dependent of the victim.
The following are some examples of financial compensation that are taxable;
- Interest – It could take months or even years for a car accident case to be resolved. Because of this, a car accident settlement could involve an interest. If you receive any interest in your Florida car accident settlement, you could pay taxes on the interest.
- Lost wages – Compensation for lost wages is meant to compensate you for the money you have lost from being unable to work. Therefore, it is taxable the same way as your usual income. To the government, it usually does not matter where your income comes from. Whether you have recovered income through a check or a car accident settlement, that income must be reported on your yearly tax return.
- Compensation for emotional trauma not related to a physical injury.
- Punitive damages – These damages are not meant to compensate a victim. Instead, punitive damages are awarded to punish a defendant. They go beyond the cost of the initial loss. Therefore, they are considered a type of taxable income.
Contact Us for Legal Help
Have you been injured in a Florida car accident because of another party’s negligence? If so, contact our skilled and dedicated Key West & Marathon car accident attorneys at Florida Keys Injury for legal help.