According to the Internal Revenue Service (IRS), car accident settlements are not generally taxable in Fort Lauderdale. However, there may be exceptions to this rule. For instance, depending on your situation, the financial recovery you gained from noneconomic losses may be taxable, since they are not observable damages. However, if emotional trauma, for example, did manifest itself physically, then these losses may be tax-exempt.
The IRS Has Various Views on Taxing Injury Settlements
There are various forms of compensation that the victim of a car accident may win through a settlement or judgment from their lawsuit. These different forms of compensation may have different tax implications.
The IRS notes that your settlement is not taxable if:
- The compensation that you received covered the direct and indirect costs of your physical injuries.
- You have not previously taken any itemized deduction on your tax return for the medical expenses that are included as part of your settlement.
Additionally, this document states that:
- Pain and suffering are sometimes considered to be equivalent to physical injury, and in some cases, are not taxable.
- Other forms of compensation may be taxable, depending on the details of your losses.
As with all tax-related issues, there are exceptions, fine print, and all sorts of other factors that require clarity from a legal professional. Following a successful car accident claim, you want to act in accordance with the IRS’s mandates or risk being accused of a tax crime.
You Only Need to Report What is Necessary
Florida is generally considered to be a favorable state in terms of taxation, but that does not mean that the tax code in Florida is any less complicated than in other areas. If you have won a settlement or plan to bring a claim, you may be privy to several different forms of compensation.
Financial recovery may include coverage for:
- Emergency medical care that you received in the wake of your accident
- Any surgeries or other medical procedures your physical well-being requires
- Lost wages or reduced earning capacity
- Any permanent scarring, disability, or loss of bodily function
- Property damage
- Mental anguish
The list of possible awards could go on. We recommend speaking with a tax professional to determine which parts of a car accident settlement are taxable in Fort Lauderdale.
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A Lawyer Can Help You Fight for a Settlement
If you have yet to file a claim or lawsuit, you may want to enlist the help of a lawyer to build a case.
They may assist you by:
- Investigating the details of your accident, possibly with the help of one or more private investigators
- Collecting evidence of negligence in your case
- Filing your case in court and seeing it through to completion, whether the result of your lawsuit is a judgment or settlement
If you have suffered harm due to the negligence of another party, consider working with a lawyer who understands how to navigate the legal process.
You Have a Limited Time to Act
If you were injured or lost a loved one in a car accident, you may not have a long time to pursue financial recovery for your losses. Per Florida Statute § 95.11, injured parties have four years to file a lawsuit. However, certain situations may allow for extensions.
Call Chalik & Chalik Injury Lawyers Today
We pride ourselves on honest representation. If you recover compensation from your car accident case, our services do not have to stop there. We may be able to refer you to a tax professional who can explain what parts of your recovery are taxable, and how to go about reporting these finances onto your tax return. Whether you are just starting a car accident claim or are having difficulty dealing with an insurance company, Chalik & Chalik Injury Lawyers can help.
Call us today at (954) 476-1000 to speak about your situation at no cost.