Tax Responsibilities And Pennsylvania Personal Injury Settlements
Pennsylvania personal injury settlements range in size. When injuries are serious, compensation amounts can be substantial, and if this is the case for you, it’s important to understand your tax responsibilities. Failing to properly manage tax implications can result in unexpected bills and penalties, which will cause you more stress when you need to put energy into rebuilding your life.
To discuss the value of your personal injury claim and what your tax obligations might be, connect with a Bucks County personal injury attorney. Working with a lawyer can result in higher compensation packages as seasoned attorneys are familiar with how to push against low-ball offers. Your attorney will work to be sure all of your damages are addressed, including physical injury or illness expenses, costs connected to mental anguish, and more.
What Forms of Compensation Are Taxable?
In general, physical injury and illness compensation amounts are not taxable, both under federal rule and Pennsylvania state law. However, it’s important to realize that there are exceptions to this rule. For example, if your personal injury case has been in process for years, and you claimed a tax deduction for medical expenses related to the injury in a prior year, settlement funds that reimburse you for the expenses you deducted could be considered taxable income.
Emotional distress recovery is handled in a different way than injury expenses. It is typically taxable. So, if your personal injury settlement includes compensation for emotional distress, you may be required to pay taxes on that portion of the settlement. Whether the mental anguish was directly related to physical injuries, or not, will also be part of tax liability review. Distress that is correlated to injuries sustained may not be subject to taxation but anguish that is unrelated to physical harm could be taxable, for instance.
Will the Taxes Be Withheld from My Settlement?
In Pennsylvania, there are no rules for personal injury settlement tax withholdings. But if you receive a personal injury settlement, it’s a good idea to consult with an expert to understand your tax responsibilities and ensure that you are properly managing any and all tax implications. With careful planning, unexpected tax bills can be avoided.
Many experts work on personal injury claims every day and are available to help you and your family. Discuss your concerns with a Bucks County personal injury attorney to learn more. In most situations, compensation for physical injuries or sickness is generally not taxable, compensation for emotional distress may be taxable, and punitive damages are taxable, but reviewing the specifics of your case will inform you on what tax obligations do or do not apply to your settlement.
Could you use financial relief after a Pennsylvania accident but you are worried about what tax responsibilities you will incur? There are experts who can help. The legal team at Kardos, Rickles & Hand will review the facts of your case and advise you on the worth of your claim, including what portion of your settlement could be taxed. To learn more, call 215-968-6602.
