Being involved in a car accident is often painful, frightening, and inconvenient. It can be relieving to acquire the skills of an attorney and pursue legal action to receive compensation for your injuries and related expenses. But will you receive the full amount that you are awarded or are car accident settlements taxable? Continue reading and speak to a Rockland County car accident lawyer for representation during your claim or lawsuit.
What Types of Compensation Can Be Awarded in a Car Accident Settlement?
There are generally three types of damages that can be awarded after you are involved in a car accident. You could receive economic damages, non-economic damages, and punitive damages.
Economic damages
This type of compensation refers to the actual costs that you were billed during the aftermath of the accident. You can be reimbursed for medical expenses, costs to repair your vehicle or other property, loss of income from being absent from work during your recovery, and more. You can receive economic damages to cover past and future expenses related to the accident.
Non-economic damages
Non-economic damages are designed to compensate you for losses that do not have a monetary value. This may include physical pain, mental suffering like PTSD or anxiety, emotional anguish, loss of enjoyment of life, etc.
Punitive damages
Punitive damages are awarded by the court as a way to further punish the defendant. They are not always given but if the liable party acted with extreme negligence, recklessness, or malice, they may be ordered to pay them.
What Car Accident Damages Are Tax-Free?
Any compensation related to an injury or medical expense is not taxed by the government. This includes lost wages and property damage. Economic damages are designed to reimburse the victim for costs that they would not have otherwise had to pay if the accident did not occur. If this compensation was taxed then the victim would not be fully compensated for their expenses.
Non-economic damages are generally tax-free as well. If you suffered non-economic losses as a direct result of your injury then the compensation is not subject to taxation.
What Damages Are Taxable?
Because punitive damages are not compensatory they are taxable. This may not be an issue for many people as punitive damages are rarely awarded in car accident settlements.
While non-economic damages are usually not subject to tax, they have to be related to a physical injury or ailment to avoid taxation. If non-economic damages are awarded without economic damages or in relation to something like humiliation they can be taxed by the government.
Work With a Skilled Attorney
If you are seeking further information regarding the types of compensation you can receive after a car accident, contact one of our experienced New York personal injury lawyers. Request a free consultation today to discuss the details of your situation.
