Is My Personal Injury Settlement Taxable?

October 15, 2015

Maybe – whether you have to pay taxes on a personal injury settlement will depend on the nature of the award and, specifically, whether it is intended to compensate you for physical injuries or illnesses.

Personal Injury Compensation that Is Not Taxable

Whether a personal injury settlement is taxable will depend on the nature of the damages awarded, a Portland personal injury lawyer explains.

Whether a personal injury settlement is taxable will depend on the nature of the damages awarded, a Portland personal injury lawyer explains.

In general, compensatory damages for physical injuries will not be subject to taxes. Compensatory damages will vary according to a case, but they generally include damages for the following (if or when applicable):

  • Lost wages
  • Medical bills for the treatment of physical injuries
  • Loss of consortium
  • Pain and suffering
  • Attorneys’ fees.

The reason for this is that such compensatory damages are considered to be repayment for some loss suffered – they are not, in contrast, seen as income (from the IRS’s and state government’s perspectives).

Personal Injury Compensation that Is Taxable

Personal injury damages will generally be subject to taxes when the compensation constitutes:

  • Compensation only for emotional harm – So, if no physical injuries were sustained as a result of the negligence, financial recoveries from these cases that only involve emotional harm would typically be taxable.
  • Punitive damages – These awards are meant to punish some negligent party, rather than specifically compensate the plaintiff (i.e., the injured party) for some loss. As such, these damages, when awarded, would also typically be subject to taxes.

The Bottom Line about Personal Injury Settlements & Taxes

When it comes to paying taxes on personal injury settlements, the bottom line is that working with an experienced lawyer can be pivotal to minimizing your tax obligations and working out the best possible settlement for you.

Contact a Portland Personal Injury Lawyer at the Savage Law Firm

If you or a loved one has been harmed by any form of negligence, you can rely on the Portland personal injury at the Savage Law Firm for experienced help and aggressive legal advocacy. For more than three decades, our lawyers have been devoted to providing each of our clients with personal attention, respect and the highest quality legal services.

We realize how devastating a personal injury can be on a physical. That is why our lawyers are here to aggressively defend injured people’s rights to both justice and compensation.

To learn more about our legal services and what we can do for you, call us at 503-222-0200 (in Portland) or at 206-957-7272 (in Seattle). You can also email us using the form on this page. We represent clients in communities in both Oregon and Washington from our offices in Portland and Seattle.

Categories: Personal Injuries, Personal Injury FAQs, Portland Personal Injury Lawyers