Is Financial Compensation Subject to Taxation?
Across the state of Kentucky and the nation, individuals are required to pay income taxes on any and all income they earn throughout the year. One common concern many people have before pursuing legal action through a civil lawsuit is whether or not financial compensation awarded to a plaintiff is subject to taxation. Financial compensation is a very important part of any civil lawsuit and may be absolutely crucial in your case if it’s needed to pay for medical bills and other losses or expenses related to the injury. Fortunately, unlike other forms of income, most compensation awarded in a civil lawsuit is not taxed.
If you or someone you know has been injured in an accident caused by someone else’s actions, you may be able to recover financial compensation to help pay for your losses. This can be complicated; thus, it’s in a person’s best interest to usually seek the support of a legal professional. Call the Louisville personal injury lawyers from the Sampson Law Firm at 502-584-5050.
Financial Compensation and Taxes
Because financial compensation is meant to reimburse plaintiffs for expenses they’ve already incurred through medical bills and other costs, the majority of compensation is not taxable. However, there are some forms of compensation that could be taxed such as:
- Punitive damages the plaintiff receives to further punish the defendant
- Compensation for lost wages
- Any interest your compensation earns while in the bank
Additionally, other forms may be taxed, depending on the specifics of your compensation and situation. Discussing this with a knowledgeable legal professional is the best way to get the most comprehensive answer.
Contact Us
To learn more about how income taxes affect your financial compensation or to discuss your case with a skilled legal representative, contact a Louisville injury lawyer of the Sampson Law Firm at 502-584-5050 and schedule a free consultation.
