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MINNESOTA INJURY LAWYERS-TAXATION OF SETTLEMENTS

 ARE PERSONAL INJURY SETTLEMENTS TAXABLE?

The Schmidt Salita Law Team can help you collect a fair settlement of your personal injury or wrongful death claim.  But does the victim of a personal injury or the families of the victim of wrongful death have to pay federal or state income taxes on the settlement?

It is important for people with Personal Injury and Wrongful Death claims, whether arising from a car accident or any other type of motor vehicle collision (truck accident, SUV accident, motorcycle accident, car-pedestrian) to know whether any settlement or recovery is taxable.

The Personal Injury and Wrongful Death attorneys at the Schmidt-Salita Law Team, formerly Schmidt Law Firm want you know that generally Personal Injury and Wrongful Death settlements are tax-free-with some exceptions.

Whether you must include the settlement proceeds in your income depends on all the facts and circumstances in your case. In every case, however, they recommend that the final opinions client get the final opinion from a certified tax accountant.

There are many exceptions including the following:

1. Personal physical injuries:

Generally, settlements for personal physical injuries or physical/emotional sickness are non-taxable.

(Exception-if you have previously taken a deduction for medical expenses, you may be required to report that portion for which the prior deduction was taken. See IRS Publication 525.)

2. Emotional distress or mental anguish:

Proceeds that a person receives for psychological injury, emotional distress or mental anguish resulting from a personal physical injury or physical sickness are also treated the same as proceeds received for personal physical injuries or physical sickness as discussed above.  They are generally not subject to income tax.

3. Lost wages or lost profits:

If any part of your settlement is specifically designated as a recovery of lost wages, earnings, or profits, it may be subject to Federal and State income tax-but only if it is specifically designated.

If you settle and no portion of the settlement is specifically designated as “lost wages or loss of earnings,” the entire settlement is generally not subject to income tax with the exceptions stated in this document-even though the threat of an income loss motivated the settlement.

Again, if a specific portion of the settlement is designated specifically to wage and earnings losses, that portion may be subject to taxation.

If your case goes to trial and the jury specifically allots a portion of the jury verdict specifically to lost wages or loss of earnings, then that portion may be subject to taxation. Again, the final opinion in this regard should be left to your certified tax accountant.

It should be remembered that loss of business income may be treated the same as lost wages or earnings.

4. Settlements for Wrongful Death:

Settlements or jury verdicts received by the heirs of the person who died as the result of the fault of another person are also aplegenerally tax-free.  Again, those settlements are subject to the same rules as personal injury settlements or jury verdicts.

5. Loss-in-value of property:

Although not specifically a part of a Personal Injury claim, your attention is called to the issue of settlements for property losses. Settlements for property loss in the value of property that are less than the adjusted basis of your property are not taxable and generally do not need to be reported on your tax return. However, you must reduce your basis in the property by the amount of the settlement. If the property settlement exceeds your adjusted basis in the property, the excess is income.

6. Punitive Damages:

Punitive damages are taxable even if the punitive damages were received in a settlement for personal physical injuries or physical sickness.

For more detailed information, consult with your certified public tax accountant. Do not rely on the advice of your Personal Injury lawyer, as tax law is not part of his or her field of expertise. Always rely totally on the accountants’ advice. Your attention is directed to IRS Publication 4345 (Rev. 12-2016) Catalog Number 38586D Department of the Treasury Internal Revenue Service www.irs.gov.

Minneapolis MN personal injury lawyers

The Schmidt Salita Law Team Handles a Wide Variety of Personal Injury and Wrongful Death Claims.

The Schmidt Salita Law Team handles cases involving car accidentstrucking accidentsmotorcycle accidentspedestrian car accidents, and bicycle accidents.  It has many years’ experience in workers products liability and medical malpractice cases.

The Schmidt Salita Law Team has extensive experience with concussion injuriestraumatic brain injuries, neck and back injurieswhiplash injuriesbroken bones, injured joint injuries (knee, hip, shoulder, wrist, ankle, spinal), amputation injuries, and vision and eye injuries.

The Schmidt Salita Law Team has offices through out the State of Minnesota.  Its primary location is at Ridgedale Office Center in Minnetonka, near the intersection of I394 and I494.  The offices offer handicap accessible with ample parking.

The Schmidt Salita Team Offers Contingent Fee Arrangements.

The firm offers contingent fee agreements (You don’t pay lawyers fees until you collect and then only as a percentage of the settlement).  It also offers home and hospital visits to clients whose injuries present difficulty in coming to the office.

“PERSONAL INJURY WITH PERSONAL ATTENTION TO EACH CASE”.

The Schmidt Salita Law Team has locations throughout the Twin Cities metropolitan area of Minneapolis and St. Paul, as well as Minnetonka, Maple GrovePlymouthOsseoAnokaCoon RapidsBrooklyn CenterFridleyBlaineShoreviewWoodburyFalcon HeightsColumbia ParkStillwaterHastingsInver GroveCottage GroveSouth St. PaulApple ValleyEaganBurnsvilleSavageShakopeeRichfieldBloomingtonChaskaChanhassenEdina, Eden Prairie, and Hopkins.