In Massachusetts, are personal injury settlements taxed? Our Personal Injury Attorneys MA explain:
It can be a stressful and painful event, whether you have sustained injuries from a car crash, medical malpractice, or someone else’s wrongful act. You have to worry about your recovery and how you can pay your medical bills, particularly if your injury causes you to miss work. Your settlement will relieve the pressure of stressing about the medical costs and missed income.
A critical question many people ask is whether your personal injury settlement in Massachusetts is subject to taxation? Our personal injury lawyers ma at the Bellotti Law Firm, P.C have discussed this area of concern below.
Your settlement is not considered income in Massachusetts, and any money you earn in a claim for personal injuries will not be taxed either at the state or federal level. This implies, in general, that without any taxes being taken out of it, you can collect your settlement and can use it to pay for your medical bills, lost wages, and future treatment.
Most settlements for personal injuries are non-taxable. There are still exceptions to the law, however. Your ma personal injury lawyer will, if possible, seek to arrange the settlement to minimize your tax liability.
- Pain and Suffering
The physical, mental, and emotional damage caused by the accident and your injury is compensated for by pain and suffering damage. Compensation for physical pain and suffering is not subject to taxes in most situations. Likewise, compensation is often not taxable for emotional distress and mental anguish associated with or induced by the physical injury suffered in the accident. Nevertheless, claims that do not contain physical injuries may be subject to mental and emotional injury compensation taxes.
- Hospital Bills and the cost of personal care
Usually, the compensation that you earn for your medical treatment and personal care is not taxable as income. However, if you report the hospital expenses as a tax deduction on your income tax returns, you could incur a tax liability that covers the medical expenses claimed on your tax return for that portion of your settlement.
- Income loss
In such cases, compensation for the loss of income may be subject to tax. If the lost income was caused by a physical injury, you may not owe income tax on compensation for lost wages. However, you might be expected to pay income taxes on the part of your personal injury settlement if the loss of income was solely focused on emotional or mental injuries. Before accepting a personal injury settlement, it is often best to consult and discuss compensation for loss of income with an experience personal injury attorney ma.
- Property Damages
Generally, the amount of a personal injury settlement that compensates you for the loss of property or property damage is not taxable unless you obtain an amount that is greater than the property adjusted basis.
- Punitive damages and interest
Punitive damages aim to “punish” a party for gross negligence and deliberate, wanton wrongdoing. Such damages are not compensatory; they are not usually subject to taxation. Also, the interest may be subject to income taxes if you collect interest on a personal injury settlement.
Consult our Personal Injury Attorneys MA
Taxes are confusing, and depending on what can often seem to be a minor aspect, the rules may vary. If you are uncertain where your position is in this matter, be sure to speak to our experienced ma personal injury attorneys at Bellotti Law Group, P.C. Our lawyers will assess whether your personal injury settlement is taxable before you make any major decisions.