Will I Owe Taxes on My Personal Injury Settlement After an Accident in Colorado Springs?

Personal injury settlements can be very large, lump sum payments. It’s not unheard for them to be as much as six or seven figures. We all know the government taxes large sums of money. Therefore, you must be wondering if your settlement counts as taxable income. Normally, the answer is no. The government will not tax your settlement. However, this isn’t always a hard and fast rule. As personal injury lawyers, our goal in this article is to educate you on what constitutes a tax-free personal injury settlement.

Injuries And Damage

The IRS has created regulatory parameters for personal injury settlements. Section (104) (a)(2) prevents the taxation of any money received for personal injury lawsuits. The law does make an exception for punitive damages. Punitive damages are a large sum of money awarded to a person in an effort to punish the defendant. The court will make the distinction between punitive and compensatory damages.

A portion of your personal injury settlement is meant to cover your medical expenses and lost wages. This is called compensatory damages. The government recognizes these damages as recovery for the pain and suffering you experienced during the accident. Therefore, it is not taxable.

Compensation for vehicular damage is also recognized as general damages by the law. This money is meant to cover car repairs and car rental expenses you incur as a result of the accident. Lost income is a different story. Damages that are specifically marked as “lost wages” may be subject to income tax. This happens because the money you receive is meant to cover lost wages that would normally be taxed by the government. In a settlement, the insurance company is required to repay you for lost wages. This will be outlined by court documents.

Emotional Distress

Keep in mind that compensatory damages normally include physical injury, illness or property damage. If you are suing an employer for harassment or discrimination, that settlement money can be taxed by the government. Breach of contract settlements are also taxable. Emotional distress is non-taxable when it is injury related. For instance, if you lose a limb due to a car accident and become depressed, you can sue for pain and suffering and recover damages. These damages will not be taxed because they are directly linked to the physical injury.

Contact A Personal Injury Lawyer

The process of figuring out what portion of your settlement is which can be very confusing. A financial adviser can help you through this process. The attorneys of Heuser & Heuser are not only lawyers but also confidants. They thoroughly understand the legal process and they will be able to advise you on your settlement. It is important to keep up with your taxes to ensure no liens or holds will be put on your settlement. When you hire Heuser & Heuser you can be assured that our personal injury lawyers will be there for you every step of the way. They have handled hundreds of thousands of dollars in settlements. If you or a loved one has questions about your personal injury settlement, contact Heuser & Heuser today!

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Frequently Asked Questions

There are a variety of things we look at when evaluating your case and determining its value. We look at how the accident occurred. We look at what sort of injuries you sustained. Do you have a permanent injury that will last the rest of your life? Are you going to have future medical bills? We look at lost wages. Did you lose your job? If you have permanent work restrictions as a result of the accident, you may not be able to find a job very easily in the future. These are some of the factors that we look at in evaluating a claim. Every case is unique and different. That’s why at our law firm, every case gets personal attention from the lawyer when it comes time to evaluate.

Insurance companies are in business for a reason: to make money. Anytime they are paying money on a claim, it means less money to their bottom line. They have literally hundreds of adjusters and hundreds of lawyers who are on their side trying to figure out how to prevent money from leaving their checkbooks. Quite frankly, you do need a lawyer to help you through this because your lawyer will make sure you’re properly compensated.

Cases settle before going to trial 80 to 90 percent of the time. However, that doesn’t mean there’s not a lot of work involved in getting a case settled outside of court. Sometimes you have to file a lawsuit and do a lot of what I call “legal maneuvering” to get a case settled. That means we take depositions from witnesses to the accident, from police officers, and from your doctors. But, yes, most cases will settle prior to trial.

We do get good results for our clients. We have settled hundreds, if not thousands, of cases where we’ve had large settlements. We’ve had substantial verdicts. We go to the mat for our clients if necessary. We’ll appeal cases. We’ll do whatever it takes to make sure our client is taken care of.

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Questions Or Schedule A Free Appointment? Click To Call (719) 520-9909

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Questions or Schedule A free Appointment? Click to Call (719) 520-9909

Our Attorneys

Attorney Gordon Heuser | Heuser & Heuser | Colorado Springs

Gordon J. Heuser, Esq.

Attorney

As a Colorado Springs native, Gordon has been practicing in Southern Colorado for 35+ years.…

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Barkley D. Heuser, Esq.

Attorney

Barkley Heuser is a Colorado native, and has lived in Colorado Springs for over 59…

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Brennan Heuser | Personal Injury Attorney | Colorado Springs

Brennan D. Heuser, Esq.

Attorney

Brennan Heuser is a Colorado Native who graduated from the University of Miami, Fl with…

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