When you are hurt by someone else’s negligence or wrongdoing, you should be compensated for those losses. This could come in the form of a personal injury settlement. If you cannot reach a settlement, you could also go to court, prove your claim, and be awarded damages.
In many cases, you will collect a substantial amount of money from your personal injury claim. In fact, Diaco Law has helped clients recover millions of dollars in damages from those responsible for harming them.
When you receive a large lump sum payment to compensate you for your injuries, it’s natural to wonder if your personal injury settlement is taxable in Florida.
This guide will help you understand the rules for when you will be taxed on your personal injury compensation. If you need more help or if you want assistance making a personal injury claim to try to get the largest possible settlement, you can reach out to Diaco Law today.
What is a Personal Injury Settlement?
A personal injury settlement is money that you receive from someone who caused you harm, or from their insurance company.
If you are injured due to a careless driver, a negligent property owner, or any other party who negligently or intentionally causes you harm, you become entitled to compensation. Diaco Law can help you negotiate a settlement from the party who hurt you, or their insurance company, so you can be repaid for your losses as the law allows.
A settlement means you resolve your case outside of court. Typically, the person who harmed you or their insurer makes you an offer of a lump sum payment, and you give up your right to future claims. You and the defendant both benefit from avoiding the time, stress, and uncertainty of court proceedings.
If you cannot reach a settlement agreement, then you can go to court to try to convince the court to award you compensation for your losses.
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Are Personal Injury Settlements Taxable?
As a general rule, personal injury compensation is not considered to be taxable under Florida law. This compensation is also not taxable under federal law. However, there are some potential exceptions. For example:
- Punitive damages, or damages designed not to compensate you but to punish a defendant, may be taxable.
- Emotional distress damages not arising from physical harm can be considered taxable.
- If you deducted medical expenses on your tax return arising from your injuries and you later get a settlement that compensates you for your medical expenses, you may be taxed on a portion of the settlement based on the percentage of the money provided to cover those same medical expenses
- If you recover pre-judgement interest, this interest income is taxable
Damages that stem from pain and suffering also follow a similar rule; if your pain and suffering is connected to a physical injury, it’s generally not taxable. If it stems from emotional distress without any underlying physical injury, it may be subject to taxation.
Outside of these situations, you usually are not going to have to worry about giving a cut of your settlement funds to the federal government or to the Florida government.
Getting Help From a Tampa Personal Injury Lawyer
Maximizing the compensation you recover in an accident claim is important, as you need to be fully repaid for the damages that the defendant caused you to endure.
The money you collect can help you rebuild in the face of tragedy. That’s why it’s such good news that personal injury settlements are not taxable. This is the money that you deserve for the injury you endured.
Diaco Law can help you to maximize the compensation that you collect if you are harmed due to a personal injury, so give us a call at (813) 221-7978 or contact us online to schedule a free consultation with a Tampa personal injury lawyer as soon as possible.