Tap To Call

Will I Owe Taxes on My Car Accident Settlement in Colorado Springs?

When you’ve been involved in a serious car accident, it can be a good idea to file a personal injury lawsuit, particularly if you’ve suffered major injuries that prevent you from working. While it’s possible your case will go to court, you may also receive a pretrial settlement. Vehicle accident settlements are meant to compensate you for your accident, and depending on the details of your settlement, you may be required to pay taxes.

If you’ve received a vehicle accident settlement, it’s a good idea to find out if you will need to pay taxes. Find out if your vehicle accident settlement will be subject to taxation, and learn why it’s a good idea to work with a car accident lawyer.

Damages for Injuries

When you receive a settlement after a serious car accident, there are several types of damages that you may receive. Commonly, you will be awarded either general or compensatory damages, which are intended to make up for any money you spent on medical expenses as a result of your accident. Usually, these damages are not subject to taxes. This is because damages awarded for medical expenses are a form of reimbursement for money that you were forced to spend due to the actions of another.

It is also possible you will receive compensation for damages inflicted on your vehicle, and like medical damages, these damages will generally not be taxed.

Lost Income

Unfortunately, many car accidents result in injuries severe enough to prevent you from working. If you can prove that you will be unable to work for an extended period of time, then your settlement may include damages for lost income. Lost income damages, unlike general damages, can be subject to taxation. This is because these damages replace work income that would normally be taxed.

It’s common for vehicle accident settlements to include multiple types of damages. You will need to examine the terms of your settlement and pay taxes on whatever portion of your damages has been earmarked for lost income. Your car accident lawyer should be able to determine if you need to pay taxes and, if so, how much you should pay.

Other Damages

Depending on the severity of your case, it’s possible that you will also be awarded punitive damages. Although these damages are extremely rare, they may be included if the actions of the at-fault driver were very dangerous or negligent. As with the loss of income damages, punitive damages are taxable. Mostly, this is because punitive damages count as income you would not have earned if there was no car accident.

Contact a Car Accident Lawyer

Filing a lawsuit can be a good decision if you’ve been seriously injured in a car accident. If you want to be certain that your claim is being handled the right way, then you need to hire a car accident lawyer from Heuser & Heuser, LLP.

At Heuser & Heuser, we understand how difficult car accident cases can be and why it’s so important to have compassionate legal representation. We can help you plan your case, potentially negotiate a settlement, and advise you if you need to pay taxes on your damages. Contact us today for information about our services.