Is Personal Injury Settlement Subject to Taxation?

Is Personal Injury Settlement Subject to Taxation?

Life is quite uncertain. You can be injured physically in accidents, such as dog bite, car accident, workplace accident or in a simple slip and fall. In this scenario, you can claim a personal injury amount. But you need to file the personal injury lawsuit within three years from the date of accident in the state court. However, the personal injury settlement amount is not subjected to state or federal income taxes.

Massachusetts state law claims that the amount you are rewarded due to your personal injury is not taxable as it’s not considered an income. But the laws change in exceptional cases. Therefore, it becomes important to consult an experienced MA personal injury lawyer before agreeing to any settlement with an insurance company. An experienced attorney can asses the situation properly and can give you beneficial advice concerning your case.

Personal injury settlements are provided to compensate for the damages one has to overcome. The money means to compensate for lost wages, medical bills, suffering, and pain. Usually, the amount is considered tax-free whether a jury award rewards it or it’s paid by payment plans.

Exceptional Incidents

Exceptions are inevitable in legal cases. Sometimes confusion also occurs due to the exceptions. Now the question arises whether emotional distress is also subject to taxation or not. Here, the cause determines whether the award is tax-free or not. If your physical injury causes you emotional distress, then the reward is tax-free. But, if your emotional distress is a result of a breach of contract or employment discrimination where you haven’t suffered any physical injury, your reward won’t be tax-free.

Punitive damage is another sort of taxable reward. It’s also important to note that during your personal injury suit, if you receive a prejudgment interest amount, then it will be counted as a taxable reward. The interest rate of prejudgment amount in Massachusetts is 1% per month.

Wrongful death insurance damages are also considered tax-free award. The nontaxable part includes compensation concerning physical injury, medicinal costs, medical care equipment’ costs along with emotional distress. However, there’s a taxable part also that includes settlement interest, lost wages’ compensation or punitive damages.

Massachusetts Personal Injury Attorney

Nontaxable settlements always seem like a blessing. However, you need to consult a qualified attorney that is specialized in the personal injury court trials. A knowledgeable attorney can assist you in obtaining the complete amount that you may need to compensate for the injuries’ lifelong impact.  Massachusetts personal injury attorney, Law firm of Amit Singh can help you with your personal injury settlement claims without paying any taxes. For further help in your damage issues, personal injury settlement rules or other legal claims, contact on 508-342-5551 or write to