Are Personal Injury Settlements Taxable?

Are Personal Injury Settlements Taxable?
Taxes aren’t the only think to consider when negotiating a personal injury settlement for yourself.
We hear this question quite a bit when we handle car accident and personal injury cases for our clients. The answer is that compensation for bodily injury in an accident is not taxable as income. (Punitive damages won at trial are heavily taxed, though). While that sounds like a simple answer, it can be a little misleading to the unsuspecting person who may be thinking about negotiating their own settlement. Just because you get a non-taxable settlement for personal injuries does not mean that you can keep all of the money. This is where an experienced attorney can help.
Personal injury settlements are often subject to liens. What does that mean in plain English? Well, if you go to the hospital after a crash, either your personal health insurance or your own car insurance carrier may end up paying for that treatment. The bills for the ambulance company, the emergency room, the physician, and the x-rays or MRIs can run into thousands of dollars. While your health insurance may initially pay for the care, your insurance company has the right to be reimbursed for those payments when you settle a case. Many health insurance companies, and Medicare, will wait until you settle your case to get paid. But, they do expect to be paid. That can be a huge surprise if you have $15,000 in liens and you settle for $15,000 – which is what a lot of car insurance companies will try to convince you to do.
Hiring a lawyer in this situation should actually save you money and protect you against surprises. An experienced personal injury attorney should not settle your case unless you recover enough to pay off any liens, pay your attorney, and have enough left over so you walk away with compensation for your pain and suffering. In our firm, we have a policy that our clients will always recover more than our attorney fee. We also work with known lien holders to either get waivers or a lien reduction.
Settling personal injury cases is not the best use of “DIY” skills because auto insurance adjusters don’t have to disclose all of this information to you. They are protecting their own bottom line, not yours. You need an advocate on your side who is familiar with these traps.
We are available to help in these situations and we don’t charge unless we recover a settlement or trial verdict for our clients. Call us today, (505) 900-3559. We have someone available to answer the phone 24/7.
We have recovered tens of millions of dollars for our clients.
Hospital negligence resulted in catastrophic injury. This was a case involving a patient who entered the hospital for routine observation but left the hospital with catastrophic and permanent injuries due to neglect and improper treatment. This case involved extensive expert testimony on all aspects of the client’s care, both by hospital administration, hospital employees, and contractors who were involved in her treatment.
Semi-truck negligence caused wrongful death. This case involved a semi-truck driver who was intoxicated on illegal substances and killed our client. The key to this case was both aggressive discovery work, and understanding the trucking laws that regulate truck drivers and motor carriers, so we could prove how reckless it was to put the driver on the road that day.
Semi-truck negligence caused catastrophic injury. This case involved a semi-truck driver who lost control of his vehicle in a high-traffic area, causing devastating injuries to our client. We were able to reconstruct every step of the events leading up to the crash that day to piece together why this happened, using sophisticated experts in reconstruction engineering.
Semi-truck and corporate negligence caused traumatic brain injury. Our client suffered a traumatic brain injury as a result of the defendant’s negligence in parking a commercial vehicle. The key to this case was understanding trucking regulations and local ordinances at play to show how the situation should have been handled safely.
Semi-truck causing wrongful death. This sad case involved the tragic death of our clients when a semi-driver was high on illegal substances. The key to this case was working closely with law enforcement and our reconstruction expert to identify all of the assets we could recover for these clients so that they could be as fully compensated as possible.