Let’s see those hands in the air:
High fives all around for the conclusion of tax season!
The tax preparers and accountants who thrive on the adrenaline that comes only during the first two weeks of April — the final, mad push to file all of those returns by Tax Day — have begun to slide back into the normal day-to-day, only to return next year.
They’ve gone, but the tax man has not.
There he stands, ever present, waiting to collect his share:
- Of your grocery bill.
- Of your hard-earned paycheck.
…and of your personal injury settlement?
“Will my personal injury settlement be subject to tax?”
This is a question the lawyers at Parrish Law Firm hear from our personal injury clients in northern Virginia hear a lot. But the answer isn’t always quite so simple.
Generally, compensation for physical injury won’t be taxed.
It’s usually true that any settlement funds awarded as a result of physical, personal injury claims are not taxable under federal law, nor under Virginia state law.
What does this mean?
This means that personal injury damages paid out to cover lost wages, medical bills, and attorney fees are not subject to tax, so long as they resulted from personal injury or illness.
But there are a few exceptions.
What’s a rule without exceptions? Nothing, I say.
Punitive damages are always taxable. Whether in court or at the time of settlement, your experienced personal injury attorney will ask the presiding figure to separate the award into ‘compensatory’ damages — that is, those to cover wages, bills, and fees — and ‘punitive’ damages, so the IRS might take its share.
Personal injury settlements are not subject to tax, so long as they result from physical injury or illness. If you’ve filed, or are interested in filing (James Parrish of the Parrish Law Firm, Northern Virginia’s personal injury lawyer, is standing by to help!).
The Parrish Law Firm, PLLC Personal Injury Attorney works with ALL Virginia residents who have been injured because of another party’s negligence and are looking for fair compensation. Contact us today for a free case consultation or call us at 703-906-4229.
Where Experience Meets Results – We Care
A representative of the Parrish Law Firm, PLLC researched and wrote this article with Mr. Parrish’s consent. If you have any questions regarding the legal implications of what you have just read, please send us your question by clicking here so we can have our attorney review it.