CAR ACCIDENT? INJURED?
YOU MAY BE ENTITLED TO SUBSTANTIAL COMPENSATIONSPEAK TO AN EXPERT LAWYER RIGHT NOW!
When it comes to figuring out whether your car accident settlement is tax free or not, it depends on a number of factors. For most cases, you won’t have to pay taxes for the settlement costs, but there are certain situations where it may be the case. Categories that fall under car accident settlements are: personal injuries, and recoveries after property damage. How the settlement is handled will play a big part in if you have to pay taxes. You should also meet with your tax advisor to see what the best step to take will be.
The majority of the time, you won’t have to pay taxes for property damage settlements. When you are paying to repair your car, or receiving the cash value back of your vehicle if it was in an intense, no recovery accident, those funds will generally not be taxed. The biggest exception is if the vehicle has been used for business purposes. If this is the case, then the settlement funds may be divided between you and the business that the vehicle was used for. How much of the funds you get depends on how much depreciation you have claimed, but the personal funds you receive afterwards won’t be taxable.
This will depend on what kind of injury you’ve received after the accident. A large part of settlements are for general damages, which cover things like medical expenses, as well as pain and suffering that occurs from the accident. Typically, most of the pain and suffering settlements are tax free, because they are meant to repay you for the losses you experience out of loss. The exception is if the settlement is for emotional distress. So, emotional injuries from an accident such as anxiety, depression, and post-traumatic stress may not be tax free.
This is a bit of an edge cause, but comes up enough that it should be addressed. Usually, a car accident settlement is done so as to discourage the defendant from acting out again. You can only expect punitive damage if the defendant has done something especially terrible. Keep in mind though, if this does happen, your awarded punitive damages are not tax free.
If you are in the middle of a car accident settlement and are seeking professional advice in Pennsylvania, a proper guiding hand through the courts will help lead you to the best case scenario. At PA Car Accident Lawyers we provide that guidance with expert experience, contact us today.