F ree eBook. Personal Injury Lawsuits. Will lay the groundwork for understanding the legal process. Should you arrange a lawsuit? How do you file? A suit starts when you submit a written complaint to the court. As a plaintiff, you and your lawyer now have the responsibility to prove your case, and the defendant can win because you failed to provide your burden of proof. Get the book!
Here are the types of cases that require you to seek the services of a Personal Injury Lawyer
Usually, you will not be taxed on money from a claim meant to reimburse you for physical injuries and emotional anguish related to such injuries. According to the IRS, compensation that is received to cover economic damages such as medical expenses, as well as non-economic damages like suffering or pain, is commonly non-taxable. However, this rule has exceptions that can include:
If the compensation is meant to cover your lost income, then it will be subject to taxation. The IRS argues that if you were not injured, then all your gains could have been taxable. Thus, the settlement intended to replace your lost wages is legally taxable just like it would have been.
In some instances, the judge can grant you pre- or post-judgment interest. However, it is vital to note that any profit that you gain from your personal injury claim is taxable. You ought to report it on line 8a of the IRS form 1040 as “interest income.”
Prior deductions for medical expenses
It is lawfully acceptable to take an itemized deduction for medical expenses related to a personal injury when filing your tax returns. However, after being compensated, part of the settlement allocated for those medical expenses is categorized as income and thus subject to taxes. That’s because you already enjoyed a tax break for these bills in the year you requested for the deduction. The IRS forbids double dipping, and hence you must report the tax benefit on line 21 of the IRS form 1040 as “other income.”
Taxation principles are fraught with nuances and exceptions. Thus, it is essential to get legal counsel to reduce the tax liability. An attorney will enlighten you on crucial tax issues to consider in your personal injury case. He or she has the knowledge and expertise to take all the necessary measures to shield your compensation from excessive taxation. For more information about taxation of personal injury settlement, feel free to contact us!