When you are trying to recover from an injury, the last thing you probably want to focus on or even consider is that of taxes. If you are receiving money from the insurance company as a result of your accident, you might not have another choice but to think about whether you are going to be responsible for paying taxes on the payout you receive. Depending on the type of insurance policy you are dealing with and the type of settlement you are going to receive, some of the money received might be subject to taxes.
To find out more information about your payout, you can speak with a Gainesville personal injury attorney to discuss your case further. Steven A. Bagen Law Firm has offices in Gainesville and Ocala, Florida, serving all of the surrounding areas. Beyond being able to provide you with information about the settlement itself, your attorney will make sure that you receive everything you are entitled to receive and not shorted out of money due to the insurance company taking advantage of you. Recovering from an accident is difficult enough; you shouldn’t have to worry about whether you are going to be jilted by the insurance company along the way.
Damages
If you receive a settlement from the other party’s insurance company, such as the homeowner whose hose that you tripped over while at their home or the driver who ended up ramming into your significant other’s vehicle, the portion that you receive to cover any injuries isn’t considered taxable income. This portion of money can also receive any payments that you received to cover emotional distress if that distress can be blamed on the injuries that you sustained.
If you are to receive punitive damages as a result of the accident, you will end up having to pay taxes on them, even if the punishment is related to injuries sustained. If you aren’t sure as to whether the money you receive is going to be taxable or not, speak with a Gainesville personal injury attorney to get a thorough explanation of the settlement received and what gets allocated where.
Health Insurance
If your own insurance company is the one providing you with the payout after your injury, you might have no option but to declare the payout as income. In the end, it all depends upon who is paying for the policy. If you are the one to pay 100 percent of the policy premium, you aren’t responsible for declaring any of those benefits received. If your employer is the one who pays for your premium in its entirety, any payouts received are subject to taxation.
When you work for an employer who pays a portion of the premium for you, you have to declare that percentage for your settlement as taxable income. If the employer pays 30 percent, you have to report 30 percent of the payout to the Internal Revenue Service. You can find out more information about your taxable portion by speaking to a Gainesville personal injury attorney.
Other Types of Insurance
Long-term disability insurance policies work similar to that of traditional health insurance. It’s not taxable income if you are the one who pays for the policy. On the other hand, the payout does become taxable when your employer is also contributing to the premium with you. You have the option of asking your insurer to withhold a portion of your money, just like they would normally withhold taxes from your paycheck. You can also choose to make a payment based on what the estimated taxes are going to be on the payout.
For those who receive a payout from an employer’s workers’ compensation plan, you have nothing to worry about with this payment. It is entirely tax-free. Money received from a state disability fund, on the other hand, is considered taxable. It is important that you have a solid understanding of whether you are responsible for paying taxes or not. To better understand your rights under the taxation laws, you can speak to a Gainesville personal injury attorney.
Important Considerations
Compensation that insurance companies pay to cover any medical bills isn’t classified as taxable income. If you have claimed any expenses as a deduction on your taxes, the insurance payment will end up covering the costs later on down the line. You are going to have to report the insurance payments in order to compensate for these deductions. Payments or settlements resulting from lost wages sustained from an injury is classified as taxable income.
In certain situations, you might have to go through and review your entire settlement and separate everything out for the claim. Identifying what was paid for injuries from lost income payments and payments for punitive damages will help you to make sure you have an understanding of what you are going to be responsible for paying and when it will be due.
