If you get hurt in a car crash and sue for damages, the last thing you probably want to think about is taxes. Fortunately, settlements from car accident cases are not usually taxable. There are exceptions though, so you may want to make sure that you are prepared for that. A Monmouth County car accident lawyer from our firm can tell you more.
Are Parts of a Car Accident Settlement Taxable?
They can be, but the bulk of a car accident settlement is usually not taxable. You should not be taxed for compensation that helps you cover:
- Medical expenses
- Pain and suffering
- Lost wages
Your settlement is not seen as income. So the IRS and the state treasury should leave you alone.
There is one scenario to consider though. If the behavior of a defendant is particularly egregious, they can be made to pay punitive damages. As the name implies, these damages are meant to punish. When it comes to car accident cases, someone like a driver who drives drunk or an unlicensed motorist who far exceeds the speed limit might be hit with these damages.
Your punitive damages are going to be taxable. This is because they are not meant to compensate you. This is something that your lawyer will warn you about. So it’s important to find someone who can help you prepare your taxes and address this potential bill.
How Long Do I Have to Sue For Damages?
You should also know that you do not have unlimited time to pursue compensatory and punitive damages. The state of New Jersey gives victims two years to pursue legal action in most cases. We recommend acting as quickly as possible. The sooner you file a lawsuit, the sooner you can receive a settlement.
Are Verdicts Taxable As Well?
Many cases like this do not end up going to court, but we should make one important point. A verdict would be treated the same way as a settlement would. So whether your lawyer is able to help you negotiate a fair compensation offer without going to court or you have to go to trial and get awarded compensation by a jury, the tax considerations should be the same.
Why Should I Hire an Attorney?
You are not required to hire a lawyer after a car accident, but we recommend talking to our legal team before you decide to go it alone. Our attorneys can:
- Help you gather evidence needed to make your case
- Connect you with expert witnesses
- File your case before the statute of limitations expires
- Negotiate with insurers
- Communicate on your behalf
- Calculate fair compensation
- Answer any questions you have about the legal process
Ask About Our Free Case Consultations
If you were hurt in a car accident, don’t try and fight for fair compensation all by yourself. Contact Falcon Law Firm and schedule a free case consultation with our team. We would love to tell you more about how our experienced personal injury lawyers can be of assistance.
