| Are Settlement or Verdict Proceeds Taxable? |
When an injured victim recovers an insurance settlement or wins a jury verdict, he or she will ultimately receive a check from the insurance company for the person or entity that caused the injury. In most situations, the proceeds of a settlement are not taxable as personal income by either the IRS or the Pennsylvania Department of Revenue.
As an example, in a settlement after a slip and fall, car accident or other injury claim, let's say the victim receives a gross recovery of $10,000.00 from the insurance company. After costs (experts, postage, medical record retrieval fees) and Attorney's fees are deducted, let's say that the net recovery to the client is $6,500.00. Normally, the $6,500.00 figure represents amounts for economic and noneconomic damages--pain and suffering and wage-loss, for example. If so, the $6,500.00 is not taxable income to the injured victim and does not get reported to the IRS or the PA Department of Revenue. However, in rare cases, particularly where there is a specific award designated for "punitive damages," for example, that specific amount of money may be taxable as income to the injured victim.
As a Harrisburg personal injury attorney, I am not a tax expert. If you have been injured in any type of accident, collision or fall, call me for a free consultation. If an insurance company wants to make you a settlement offer an you do not have a personal injury lawyer helping you, I can help you and can get your questions answered. If you have specific questions about taxable income, I can get you in touch with knowledgable tax experts too. |
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Posted By Christopher Marzzacco on July 20, 2010 11:16 am | Permalink  |