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Home > Articles > Taxation on Injury Awards

Taxation on Injury Awards

Personal injury awards and settlements often mean that a person receives a significant sum of money to cover costs associated with an accident. However, as with any large amount of income, the funds gained from an injury claim fall under tax considerations. In some cases, a person needs to pay out a portion of his or her award to the government for taxation. On the other hand, other kinds of settlements retain a tax-free status.

To discuss your legal rights and options as an accident victim, contact the car accident lawyers of Habush Habush & Rottier S.C. ®, at 800-242-2874 today.

When is a Settlement Not Taxable?

The tax code does not require recipients of compensation awards to pay taxes on that money in certain cases. This is not the case with civil claims primarily involving employment disputes and libel. These damages, along with most forms of punitive damages, require the recipient to pay out a portion of the money according to the tax code.

The following kinds of compensation are widely considered tax-exempt:

  • Medical bills
  • Lost wages
  • Emotional and psychological damages

Certain sums can lose their tax exemption if they are attached to the compensation sum as interest. While the principal amount will not be taxed, the amount coming out of interest can be taxed.

Contact Us

If you have sustained an injury from a car accident caused by another driver’s negligence, you may be eligible to pursue legal action. For more information regarding your rights and options, contact the Madison auto accident attorneys of Habush Habush & Rottier S.C. ®, today by calling 800-242-2874.

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