March 7, 2024

Are Auto Accident Insurance Settlements Taxable?

Getting into an accident is one of the worst things that can happen to you. Not only are your physical injuries a huge burden, but figuring out how to

Are Auto Accident Insurance Settlements Taxable?

Getting into an accident is one of the worst things that can happen to you. Not only are your physical injuries a huge burden, but figuring out how to pay for rehabilitation and lost wages can be difficult.

When it comes to insurance settlements, we often hear about people who sue and win a lot of money in court. But what about those who settle with their own car insurance company? Are auto accident insurance settlements taxable?

Taxes on Car Accident Settlements

There are so many nuances to car accident insurance settlements, not all of which will be taxed. A good lawyer can help you structure your settlement in a way that minimizes the amount taxable by emphasizing compensatory damages over other types like emotional distress or lost wages.

The type and contents of an income tax return depending on what is included as part of the settlement for each individual’s particular case. This means it’s crucial to work with legal counsel before settling anything because it could make getting money back through taxes much more difficult later down the line if necessary adjustments weren’t made from day one.

Structuring a Settlement Properly

To get the most out of your settlement, you need to make sure that it is written up properly. When people are trying to negotiate their own settlements and write up their agreements on how much they want in compensation for things like medical bills or lost wages, they often lump all types together as one unitary sum without specifying what part should be taxed and which parts will not be taxed. This can cause problems when figuring out how much money was received from reasons such as pain-and-suffering damages versus taxable income due to receiving healthcare treatment benefits from injury-related events.

Be aware that, if the IRS decides to challenge you on your settlement amount and it is for a taxable purpose, then you as the taxpayer will need to prove them wrong to avoid taxes.

If this happens while there are no accurate records or timely ones available due to your poor recordkeeping habits of yours, then proving yourself right can be difficult at best.

How Can a Lawyer Help You with Settlement Taxation?

The amount you will have to pay in taxes after an auto accident depends on the situation. If it was a personal injury case, the settlement is more likely subject to taxation than if it were for property damage only. A lawyer can help you understand your tax obligations and make filing easier before receiving any money from settlements or awards of damages so that everything goes smoothly when claiming your award as income at tax time next year.

The more in-depth your lawyer understands the damages you have incurred, the less work it will be for them to classify and itemize everything. They’ll know what’s tax-deductible and what isn’t so that they can help save you money on taxes.

If you have been in an accident and are now suffering financially, we can help. The team at Southwest Insurance Claims Lawyers Las Vegas represents victims of auto accidents to get the compensation they deserve so that their financial woes do not continue for years after a car crash without being able to work or go about daily activities as normal.

Our goal is ensuring your life goes back to “normal” following this type of event by providing relief where it’s needed most: your finances! Call us today at (702) 600-3200 to talk with one of our experienced insurance claim lawyers.

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If you have been hurt in a car accident, Southwest Injury Law is the best personal injury law firm in Nevada and Arizona. Get off the phone with insurance adjusters and focus on healing. Leave the legal work to Southwest Injury Law, your trusted Personal Injury Lawyers In Las Vegas, NV, Phoenix, AZ, and surrounding areas.