Can The Government Tax A Car Accident Settlement?

The law awards compensation to victims of an automobile accident, in order to help each of them get back to their original position, financially. For that reason, the money received following most car accident settlements does not get subject to taxes. Still, that does not mean that when a victim receives money as compensation, then he or she should automatically assume that no cent must ever be handed over to the government.

The type of loss suffered by the victim has an effect on the tax-ability of the awarded compensation.

Money offered to cover the costs of property damage, such as money for repairs does not get taxed. In fact, residents of some states put their efforts into enjoying their ability to reduce the cost of the repair process. In that way the same residents manage to stretch any dollar that has been obtained as compensation for repair work. That is not a new practice; it has been followed for quite some time.

In contrast to the funds for damaged property, a portion of the money given as a replacement for lost income, or in place of lost future earnings belongs to the government. For that reason, the money in such funds can be taxed. That fact should not surprise anyone that has ever received a paycheck.

Another damage award that can be taxed.

Money awarded for punitive damages is taxable. The law does not award such money for the purpose of returning a victim to his or her former position financially, Instead, it uses punitive damages as a way to remind anyone that might carry out an egregious act of this fact: The actual performance of such an action invites the requirement that a price be paid by the negligent individual.

An added role for the personal injury lawyer

This particular role seldom gets mentioned in the literature put out by personal injury lawyers. Any personal injury lawyer in Oakville can tell a client which awards get taxed by the government. In that way, a lawyer’s advice can keep the receiver of such an award from being penalized for failure to pay a tax on money that was received as compensation, following a motor vehicle accident. That fact adds to the reasons for hiring a personal injury lawyer, if you have been injured in a car accident.

However, it is important that you talk with a lawyer only after knowing that they have dealt with such cases in the past. This will ensure that they understand the nuances of your case and will help you get the much needed assistance with considerable ease.