Much of the money included in a car accident settlement isn’t taxed. However, some compensation could be taxable. The reimbursement for the income you lose while you must miss work can be taxed, just as if you had received your normal paychecks.
A skilled Bakersfield car accident attorney can often help you earn more for your car accident injury than you could win for yourself. This might put you in a much better position to cover the medical bills you have and the taxes you might have to pay. It’s also advisable to go over your tax filing with a California tax professional after receiving any personal injury settlement.
What Isn’t Taxed in a Car Accident Settlement?
California legislators set it up so that any support meant for the medical care of accident victims remains tax-free. That money should either pay off the medical debt a car accident victim has built up or pay for the care they may need in the coming years.
Here’s a list of a few of the things that aren’t normally taxed in a car accident settlement:
- Money meant to help pay for medical care for an injury or illness suffered in a personal injury accident.
- Support determined from the estimates on care the patient is expected to need in the future. This can be for future surgeries and physical therapy a victim may require years down the road.
- Money for the life-long support of a patient who has suffered a permanent physical disability.
- Compensation for “pain and suffering.” This legal term includes the compensation you receive for the pain you go through in an accident and during recovery. It also includes any support paid for the emotional trauma victims may have to cope with. This can include the depression victims may experience or the PTSD symptoms from a violent impact.
- The money you receive for repairs to your personal property like a damaged car, motorcycle, or bike.
The taxable portions of some settlement checks would include the support received for the replacement of paychecks that the victim loses while they can’t work.
One taxable segment that hasn’t been mentioned is the potential for punitive damages. These are rarely granted in car accident cases, but it sometimes happens. Punitive damages are levied against those at fault when their actions go far beyond the definition of a normal accident.
These damages are meant to add extra punishment for a driver who showed a dangerous lack of care towards other drivers. They could be accessed in a case involving a driver who is guilty of street racing or a hit-and-run. Punitive damages are meant to convince the at-fault driver and others to never engage in this reckless behavior again.
The extra monetary fine isn’t collected for the victim’s sake, but the money paid would go to the victim. And this money would probably be taxed.
Again, it’s always important for car accident victims to file their taxes with the help of a tax expert. Victims don’t want to mess up their taxes, only to have to give back more of their settlement money a year later.
When Should I Have a Lawyer for a Bakersfield Car Accident Case?
It’s a good idea to speak with a real Bakersfield car accident lawyer after any serious accident that you didn’t cause. Contact us even after the settlement negotiations have started if you feel your claim isn’t being taken seriously. We offer a free, no-obligation case consultation.
If you do need a lawyer to represent you and keep things progressing, you don’t have to worry about how you’ll pay Maison Law Accident & Injury Lawyers. We don’t charge anything unless we win your case for you. Then our fee comes out of the settlement check that an insurer must write for you.