If you’ve just won your personal injury case in court, or secured a settlement out of court, you’ve likely already got a good idea of what you’ll be doing with your damages. Maybe you’ll want to pay bills that have piled up while you were pursuing your case. You may seek medical treatment or surgery to minimize your pain and suffering. You may just treat yourself to a nice dinner or a luxury purchase. One expenditure you won’t have to worry about with your settlement is to the taxman. In Maryland, Virginia, and Washington DC, the government collects no taxes for any settlement relating to your pain and suffering or recovery from an injury. You can click here to learn more legal facts.
The lone important exception to this rule is compensation for lost wages. If you receive damages that are expressly denoted as lost wages that then becomes subject to income tax. The United States income tax is a tax levied on the income of individuals and businesses (corporations or other legal entities) within the United States. The tax is imposed by the federal government, and most state governments also impose an income tax. The tax base for the federal income tax is primarily wages and salaries, but it also includes interest, dividends, capital gains, pensions, rents, and royalties.
Laws vary from state to state. Circumstances within individual legal proceedings can vary even more wildly. When closing in on a settlement or positive resolution in your case, consulting an accountant will help you become appraised of your situation and avoid any unpleasant surprises. Contacting your attorney to figure out what you may be compensated for is also a good idea. Malloy Law Offices prides ourselves on dealing openly with our clients, keeping them involved in their cases, and resolving cases as quickly as possible. Call us today for your free consultation. We’ll fight for you.