Are Personal Injury Settlements Taxed in New York?
If you have been injured as a result of someone else’s negligence, you have been through plenty – not the least of which is bringing your personal injury claim. Obtaining a settlement that adequately covers the damages you’ve suffered is paramount, but it does not end there. It’s important to ensure that your settlement is structured in such a way that any tax burden doesn’t significantly offset the compensation you’ve been awarded. If you have a personal injury claim, you need an experienced New York personal injury attorney on your side.
Compensation for Physical Injury or Illness
Your personal injury settlement is based on compensating you for the injuries you sustained as a result of someone else’s negligence. You may be compensated for a variety of damages, including:
- Your medical expenses for the injury or illness
- Your lost wages
- Your pain and suffering
- Your emotional distress
Generally, none of these are taxed under either New York or Federal taxation laws (both follow identical legal requirements), but there are exceptions.
Physical Injury or Illness
Injuries caused by negligence are fairly straightforward. For example, if you broke your leg in a car accident caused by a drunk driver, you’ll be compensated for that physical injury. Illness is a bit more complicated, but sometimes another person’s negligence can lead to a physical ailment. For example, a construction site that exposes its workers to dangerous levels of asbestos may be responsible when an employee contracts mesothelioma – a kind of lung cancer directly linked to asbestos.
The law dictates that when the settlement is intended to cover the injured party’s damages that were incurred as a result of the other party’s negligence, the amount is not taxable. This includes the pain, suffering, and emotional distress the victim suffers as a result of his or her physical injuries.
Emotional Distress and Pain and Suffering
When the injury itself is the pain and suffering and/or the emotional distress endured as a result of the defendant’s actions – without the involvement of a physical injury or illness – the compensatory damages awarded are likely taxable. As an exception to the exception, however, if part of the compensation awarded was for treating the distress in question, that portion typically isn’t taxed.
When the defendant’s conduct is considered especially egregious, punitive damages may be awarded. Said damages are intended to punish the negligent party, but they’re not common in personal injury cases. They are, however, taxable.
Call Today to Schedule a Free Case Evaluation with a New York Personal Injury Lawyer
If someone else’s negligence leaves you injured, it’s a complicated matter, but the experienced personal injury attorneys at Lipsig, Shapey, Manus & Moverman in New York City are committed to giving your case the careful legal attention it deserves. We are one of the oldest, most respected, and well-established firms in the City, and we pride ourselves on helping clients like you obtain the compensation to which you are entitled. To learn more, please don’t hesitate to contact us onilne or call us at 212-285-3300 today.