Is a Car Accident Settlement Taxable?

You might have asked yourself if a car accident settlement is taxable. Fortunately, for most types of damages, it is not. Read on to discover what parts of your car accident settlement could be taxable.

Taxable or Not? Considerations for Your Car Accident Settlement

Perhaps you’ve already been awarded damages for your car accident claim. Or, maybe you’re considering filing a claim, but aren’t sure what your possible tax liabilities would be following the awarding of a settlement.

The good news is that most of the damages you can recover for having been injured in a car accident caused by someone else are not taxable. Some examples of the core damages that are always tax-free include:

Medical bills
Lost wages or loss of income
Pain and suffering
Emotional turmoil
Property damages
Loss of vocation

That means that any money awarded for your time spent in the hospital, an ambulance ride, or even physical therapy related to your accident can be received and spent without fear of being docked by the federal or state government. That being said, there are a few minor exceptions.

In cases involving extreme negligence on the part of the at-fault party, any punitive damages awarded are considered taxable. Finally, in rare cases where you’ve been awarded interest on a judgement, you should be aware that the interest can be considered taxable.

If you’re wondering how tax liabilities could impact your car accident settlement, an experienced lawyer in Savannah can help.