Personal injury Attorney reminds you that personal injury settlements are tax free.
If you decide to settle your personal injury claim, then the Internal Revenue Service will not consider the money you receive as income that needs to be reported on your income tax return. Section 104(a)(2) of Revenue Code provides this relief and the reason that this relief is allowed is to encourage parties to settle their claims and lawsuits. As a personal injury attorney since 1986, I have witnessed hundreds of clients taking advantage of this benefit in the tax laws. It has encouraged many of my clients to accept settlement offers they might not have accepted otherwise. No one likes to pay taxes and this provision in the Tax Code can be a huge benefit to a personal injury victim. If you received a $100,000.00 settlement you could more than 1/3 of that to the IRS if it were not for this law.
On the other hand, if you receive a judgment, either from a judge or jury, significant parts of the judgment will be taxable as income to you. If your judgment includes an award for lost wages or impairment to your ability to earn money in the future, then you will have to pay taxes on these parts of the judgment.
The law declaring personal injury settlements not to be income has been extended to structured settlements (periodic payments over time instead of one lump sum payment), including the interest earned on the structured settlements. If your settlement is large enough, you should strongly consider a structured settlement due to the tax benefits provided in Revenue Ruling 79-220.
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If you have suffered a personal injury due to the negligence of another, contact personal injury attorney Matt Troutman of the Troutman Law Office direcly or firstname.lastname@example.org or complete the case evaluation form on this page.