Taxes and Personal Injury Compensation

When a person files a personal injury lawsuit, he or she may secure compensation through either an out-of-court settlement or an in-court decision. These awards can often be for a large sum of money, and often, lawsuit awards are considered to be a form of income. However, the government understands the importance of this compensation and generally waives taxes on this money.

Taxing Compensation

Money gained through a personal injury lawsuit is usually considered non-taxable for the recipient. In part, this is due to the complications that would occur if these funds were taxed. When parties reach a settlement, or when a judge or jury decides on a fair amount of compensation, a victim will often receive the money he or she needs to cover the costs of his or her accident-related expenses. If taxes are taken out of the award, then the amount awarded may actually fall short of the victim’s expenses. As a result, compensation for the following is typically not taxed:

• Medical bills
• Lost wages
• Loss of consortium or a loss of a relationship
• Emotional or psychological damages

However, additional funds such as punitive fines assigned by a court or the interest accrued on compensation may be taxed.

Contact Us

If you or someone you love has been injured because of another individual’s negligent actions, there may be legal options available. For more information regarding your rights and options, contact the St. Louis personal injury lawyers of the Finney Law Office today at 314-646-0300.