Will A Personal Injury Settlement Affect My Louisiana Taxes?
Posted on Apr 8, 2021 in Car Accidents, Insurance, Personal Injury, Resources, Traffic
With tax season upon us you might be wondering if your personal injury settlement is going to be taxed by the state of Louisiana or the federal government. It’s safe to say nobody likes doing their taxes, let alone paying them. Suffering from injuries after a car accident is stressful and frightening enough on its own, so understanding which aspects of your settlement are and are not subject to income tax can bring some relief.
If you or a loved one has been injured in an accident, we know you want to keep as much compensation as possible from your settlement after any applicable taxes. At Bloom Legal in New Orleans, our car accident attorneys will fight to help you get the money that you deserve and assist you through every step of the claims process.
What Typically Is And Is Not Taxed?
With both injury claims and taxes, it is always best to consult a licensed professional when you have questions. Like personal injury attorneys, tax accountants and tax preparers exist to help you keep the money that you deserve. Our dedicated personal injury lawyers at Bloom Legal in New Orleans are always happy to answer any questions you may have concerning your claim.
While tax questions should always be directed at licensed tax pros, here are some basic facts and guidelines concerning personal injury settlements:
- As a general rule, settlements from most physical injuries are not considered income in Louisiana or federal taxes.
- Out-of-court settlements from insurance companies are also non-taxable.
- Emotional distress is considered a taxable form of personal injury, and other non-physical injuries could also be taxed.
- If you were in an accident and sued for compensation for a non-physical injury, like emotional distress, that payment may be exempt from taxes as long as the emotional injury was found to be the direct result of the physical injury inflicted by the defendant.
- Punitive damages, ordered when a defendant is found guilty of particularly negligent or intentionally harmful actions, are taxable.
- If your case took a long time to settle and you gained interest on your settlement, that interest is taxable while the settlement itself is not.
- If you took out an itemized deduction for medical expenses related to the injury in prior years before your case was settled, you will owe that money back to the IRS.
These are just some general answers to frequently asked tax questions regarding personal injury settlements. Other conditions or exceptions may apply to your particular case. Your Louisiana personal injury attorney and tax preparer can guide you through more ways your settlement might be specifically taxed.
Always Consult A Professional
If none of the above apply to your case, or if you still have tax questions consult a tax professional. For any legal questions concerning a car accident or other injury claim, don’t hesitate to reach out to our New Orleans personal injury lawyers here at Bloom Legal.
We understand how stressful navigating the legal system while suffering from a severe injury can be. Call 504-599-9997 today to let us help you!