Car Accident Lawyer Las Vegas, NV
If you’ve recently been involved in a car accident, you may have already begun the process of working with a Las Vegas, NV car accident lawyer to recover your financial losses. These recovered funds are typically used to pay for medical bills stemming from the accident, damage to personal property, compensation for missed work and lost wages, and compensation for projected future financial losses.
Although this money is intended to provide you with peace of mind moving forward, you might find yourself worrying about how a settlement could affect your finances — and specifically your taxes.
The simplest answer here is that you do not have to pay taxes on the money you receive through a personal injury settlement. This holds true whether you receive the money through an informal mediation process or through a formal court hearing. That being said, there are some notable exceptions to this rule.
In order to determine which parts of your settlement might be subject to taxes, you’ll want to examine how much money is being awarded for specific purposes. When you receive settlement money to pay for medical bills or repairs to your vehicle, you generally do not have to pay taxes on this money. This is because these funds are considered “compensatory damages” and are intended to compensate you for real financial losses that can be calculated. The majority of car accident claims only involve compensatory damages.
However, compensation for lost wages is also considered a compensatory damage — and you’ll want to stay mindful that this money could be taxed. This part of your settlement may be subject to income taxes because it is technically taking the place of your regular wages and is therefore subject to the same taxes.
“Punitive damages” are another part of some settlements, particularly in cases where the accidents cause life-altering or fatal injuries, or when the liable party acted in a particularly violent or negligent manner. Punitive damages are intended to punish the liable party while also validating the pain and suffering that the victim is feeling. Since this money does not compensate the victim for out-of-pocket costs, it is usually taxable.
Bear in mind that if you receive punitive damages, there are some situations where this money could be confiscated from you. If you have a large amount of debts or if you are behind on child support payments, for example, your punitive damages could be used to fulfill your back payments.
Contact a Car Accident Lawyer
Keep in mind that every car accident case is unique; while it’s okay to search for general information online or from other people who have had similar experiences, this doesn’t come close to speaking with a lawyer in person. If you haven’t yet begun filing an accident claim or if you’re struggling to get a handle on an ongoing claim, talking with a car accident lawyer Las Vegas, NV clients recommend can be very beneficial. This lawyer may also be able to refer you to an estate planning lawyer in the area who can help you with any financial issues that may result from a settlement.