Typically, personal injury settlements for compensatory damages are not taxable in New York. However, some compensatory damages could be taxed on a state and federal level.
Understanding how IRS regulations and New York laws apply to your personal injury settlement will help you meet your tax liability and avoid unnecessary complications following a personal injury claim. If you have questions about your legal case, a New York personal injury lawyer from our firm will go over your claim in detail.
In This Article
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- Non-Taxable Compensatory Damages in New York
- Compensatory Damages That Might Be Taxable in New York
- Paying Taxes on a Personal Injury Settlement in New York
- How Our Personal Injury Lawyers Fight for Your Settlement
- Call for a Free Consultation With Our Personal Injury Law Firm in New York
Non-Taxable Compensatory Damages in New York
Compensatory damages are designed to help injury victims recover losses they suffered due to negligence, with the intention of making the victim whole again. Personal injury settlements in New York frequently include non-taxable damages for:- Medical bills
- Physical pain and suffering
- Emotional distress caused by physical injuries
- Disability
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Compensatory Damages That Might Be Taxable in New York
Some damages you recover in a personal injury settlement might be taxable under both federal and state law. These include:- Settlement interest: If your settlement earns interest while your case is being resolved, the interest is taxable as income.
- Certain emotional distress: If you receive compensation for emotional anguish that is not directly related to physical injury, you may owe tax for that portion of your settlement.
- Medical tax deductions: If you received a tax deduction for medical expenses related to your injury, you might have to pay tax on that portion of your settlement.
- Lost income: The IRS and state tax authorities might consider lost income in a settlement taxable, as you would have paid income tax on the income had you earned it directly.
Paying Taxes on a Personal Injury Settlement in New York
Depending on your settlement structure, you may receive your settlement in a lump sum or a series of installments. This can affect how and when you file your taxes. You must report your settlement to the state and federal government with your annual tax return. However, you may also need to make tax payments on a quarterly basis to avoid penalties. If you owe taxes on your personal injury settlement, consider consulting with our personal injury lawyers and a tax professional. We will explain what portions (if any) of your settlement are taxable and why, and if there are any available, legal ways to minimize what you owe. A professional tax advisor can guide you through the filing process.Click to contact our personal injury lawyers today
How Our Personal Injury Lawyers Fight for Your Settlement
There are many reasons to hire a personal injury lawyer for your claim. When it comes to taxation, personal injury lawyers in New York know how to navigate tax laws specific to personal injury settlements and awards. Our law firm makes sure your settlement is appropriate by:Managing Your Personal Injury Case From Beginning to End
A lot of work goes into seeking the right compensation for accident victims. Vital tasks include:
- Staying in touch with the victim throughout their case, so they always know what is happening and have every chance to ask questions and express their wishes during the legal process
- Identify the liable party or parties who caused the personal injury, so we know who is legally responsible for paying whatever settlement you are entitled to
- Establishing and maintaining contact with all other parties involved in the case, so the entire process runs as smoothly as possible with no delays or miscommunications
- Collecting evidence to prove the liable party was negligent and therefore owes you certain types of damages
- Calculating how much your case is worth so we enter the negotiation phase with a thorough understanding of what you are owed and what specific types of damages (medical bills, pain and suffering, and so on) you should pursue
Negotiating an Appropriate Settlement For All Your Losses
Throughout your case, your legal team focuses on recovering the maximum possible compensation for your injuries. That includes considering the impacts taxation will have on your final settlement. We will represent you at all meetings with the liable party’s insurance company and evaluate any settlement offers they make. This way, you will be confident that whatever amount you end up receiving is an accurate reflection of your losses.Establishing a Settlement Structure to Maximize Your Payout
While negotiating with the at-fault party and their insurer, your personal injury team will assess how certain damages might be categorized as taxable income. Using this information, we strategically approach your settlement agreement and attempt to maximize the payout for non-taxable items while minimizing taxable settlement amounts. We will also determine whether you benefit, from a taxation perspective, from periodic payments or a lump sum.Planning Investments for Your Settlement Proceeds
Your attorney and a financial planner can guide you through managing your settlements to ensure optimal return on investments. We work with you to establish an investment strategy consistent with your lifestyle and financial needs.Complete a Free Case Evaluation form now
Call for a Free Consultation With Our Personal Injury Law Firm in New York
If you or a loved one were injured due to another person’s negligence, our Long Island personal injury attorneys will not only seek compensation, we will explain if any part of your potential personal injury settlement is taxable in New York and why. Contact Friedman & Simon, L.L.P., today to arrange a free, no-obligation case review with a member of our team.Call or text (516) 932-0400 or complete a Free Case Evaluation form