Do I Have to Pay Taxes on My Personal Injury Settlement or Award?

You just got your personal injury award check. Do you get to keep all of it?

An experienced Baltimore personal injury lawyer will advise you that the general rule is that physical injuries or physical sickness settlements are generally not  taxable [ e.g. those sustained in a Baltimore car accident]. But, the IRS in Publication 4345 (Rev. 6-2006) tells us the that it recognizes "that receiving a settlement award (amount) from a personal injury suit may create new tax issues for some individuals." The type of settlement you receive is determined by your Final Settlement Agreement.

Physical injuries or physical sickness settlements are generally non-taxable.

Do I Have to Pay Taxes on My Personal Injury Settlement or Award? - Attorney Blog Baltimore MD - Criminal Defense, Personal Injury Lawyer - Eric T. Kirk - hammer-802296__180If you receive a settlement for physical injuries or physical sickness and did not take an itemized deduction for medical expenses related to this injury in prior years, the full amount is non-taxable and generally does not need to be reported on your income tax return. But If you receive a settlement for physical injuries or physical sickness and did deduct medical expenses related to the injury, the tax benefit amount is taxable and should be reported as “Other Income” on line 21 of Form 1040."

Beware though. The IRS also tells us that "interest, punitive damages, emotional distress or mental anguish, and employment discrimination or injury to reputation settlements are generally taxable." [IRS in Publication 4345 (Rev. 6-2006)]. I have made it my habit and practice to fully advise my clients on every aspect of their personal injury claim to the best of my ability and experience. In fact, I extend a complimentary case evaluation and strategy planning session to all new clients. When it comes to tax law, however, I recognize the extent of my knowledge ends quickly. I  always suggest my client with tax and financial planning professionals to fully determine their  obligations and options.

 
 
 
 
 

HOW IS FAULT DETERMINED IN A MARYLAND CAR ACCIDENT CASE?

Police officers, claims adjuster, attorneys, judges and jurors all give their conclusions on who caused an accident. Obviously, the conclusions offered by judge or a jury are going to be conclusive, absent an appeal. But what set of rules guides...

The Top Five Things To Expect In A Personal Injury Case.

Whether you are dealing with a motor vehicle accident, a slip or trip and fall claim, or some other negligence based case, in any personal injury claim, obviously, there's going to be an accident, or an injury, or both. The injured person will...

What is an Alford Plea under Maryland Law?

Almost 50 years ago the US Supreme Court recognized that if certain criteria were met, a sentencing judge could accept a plea – in effect a de facto plea of guilty- from an individual who maintained they were, in fact, innocent. Alford plead...

WHAT IS CONSIDERED PERJURY UNDER MARYLAND LAW?

Maryland criminal law makes it a crime to knowingly and falsely make an affirmation of material fact under oath, or in affidavit authorized by law. The falsity must be given knowingly, and not be the product of surprise or confusion. Moreover, the...

IS IT A CRIME TO MAKE A BOMB THREAT IN MARYLAND?

Most of us are familiar with a prankster who pulls a file alarm. In post-911 Maryland, this conduct is not viewed as harmless fun. Section 9-504 of the Criminal Law Article makes it a crime to circulate or transmit to...

IS IT ILLEGAL TO HACK INTO A COMPUTER IN MARYLAND

Maryland law punishes the conduct that is informally known as “hacking”. Current law makes it a crime, standing alone, to gain access to someone else’s computer data, whether or not information is stolen. The law was...