Imagine fighting a personal injury claim for months. The bills are piling up, and you’re worried you might not get the compensation you need. When you finally get your settlement, a new wave of fear comes over you. You wonder whether you need to report your settlement to the IRS. That raises an important question: Are product liability settlements taxable?
Personal Injury Cases
Neither the federal government nor the state of Missouri requires taxes on personal injury settlements. However, it should be noted that “personal injury” specifically refers to physical injuries and illnesses.
Once you win your case, the money is yours. That allows you to make the best possible use of your money. Product liability cases have a lot of hidden expenses that can pile up quickly. Besides medical bills, claimants should also consider lost wages, therapy, pain and suffering, replacement possessions, and more.
While the IRS doesn’t tax physical injuries, they will tax other legal claims. For example, punitive damages (extra compensation for injuries caused by malicious intent) are taxable. Additionally, while the settlement itself isn’t taxable, the adjustment might be.
Legal cases can take some time to settle. While the case is pending, the settlement amount generates interest. This can, potentially, make the settlement bigger than the expected maximum. However, interest gained on a settlement is taxable, even if it applies to a personal injury case.
You can discuss the details of settlement taxes with your attorney. A skilled product liability attorney will keep you up to date throughout the process and ensure your settlement is a smooth as possible from pay-out to take-home.
If you or someone you love suffered serious injuries or even wrongful death because of a defective or dangerous product, we here for you. If you’d like an experienced Missouri personal injury lawyer from Kolker Law Firm to evaluate your case, please send us an email or call (314) 684-8285.