Are Wrongful Death Lawsuit Settlements Taxed?
How much of the money from a settlement of a wrongful death claim would go into your pocket is one of the factors you should think about when analyzing it. Are there any steps you may take to reduce or eliminate having to pay taxes on the financial damages you receive?
Wrongful Death Settlements Are Generally Not Taxable
According to IRS Rule 1.104-1, the settlement money you receive in a wrongful death case is exempt from taxation. Because wrongful death compensation is considered to be a component of a claim stemming from personal injuries or physical illnesses, the IRS declares it to be non-taxable.
You can extend the life of your settlement and meet your family’s requirements for as long as feasible by being aware of the taxable state of your wrongful death case payout.
Exceptions to the Wrongful Death Settlements Are Not Taxable Rule
The issue of whether the settlements from your wrongful death claim qualify as taxable income might get more complicated under certain conditions. Your payment from a wrongful death claim is not taxed by the IRS.
- The portion of your settlement you received for medical bills and costs you deducted from your income in prior years is one example of a settlement portion or amount that may be taxed.
- If your mental anguish was not brought on by a bodily injury or sickness, you may be eligible to receive some of the settlement you get for that reason.
- There are situations when interest is included in an award. This issue frequently occurs when a case is appealed. Both pre-judgment and post-judgment interest may exist. The settlement’s accumulated interest component must be taxed.
- A lawsuit’s or an insurance settlement’s earnings qualify as punitive damages.
Your wrongful death attorney can assist you in understanding the classification of each component of your settlement and how it can affect the amount of your compensation.
Talk to a Wrongful Death Attorney about Taxes
The taxes for a wrongful death settlement can be complicated But that stresses the need to hire a wrongful death attorney experienced in taxes for wrongful death. David P. Willis has decades of experience in these matters. He is a board-certified personal injury trial law specialist representing families in wrongful death lawsuits across America. For almost 40 years, we’ve put in a lot of effort to get the best results for our clients, and we’ll do the same for you. Call us at 1-800-883-9858 to tell us your story.