Are Civil Lawsuit Settlements Taxable?

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Is My Personal Injury Settlement Taxable?

Is My Personal Injury Settlement Taxable?

Oct 14, 2022

A lawsuit settlement can be critical to helping an injured victim recover much-needed financial compensation for a variety of losses. Whether your injury was due to a car accident, slip and fall, or dog bite, a civil claim for damages can be the best means of ensuring that both your physical and financial well-being are properly addressed.

But when you receive your personal injury settlement check, do you have to worry about paying taxes on the money you’ve recovered?

In the sections below, we will review everything you need to know when receiving a personal injury settlement check, including whether or not the damages award may be taxable. Additionally, we’ll provide information on how to file a car accident, premises liability, medical malpractice, or other type of personal injury claim with the experienced attorneys at Dordulian Law Group.

What is a Personal Injury or Civil Lawsuit Settlement?

When you have a civil claim against a negligent party, a settlement represents an option to reach a legal agreement as an alternative to going to trial. When a defendant agrees to an injured plaintiff’s claims (whether all or a select few), he or she is indicating that they do not wish to pursue the matter further in court.

A civil settlement typically requires the defendant (liable party) to pay the injured victim financial compensation for certain losses. Such losses are known as damages in personal injury settlements and can include things like hospital or medical care expenses, rehabilitation or physical therapy costs, lost wages, diminished capacity to earn future wages, pain and suffering, and more.

A settlement is also commonly referred to as “settling out of court,” as the binding agreement between the defendant and the plaintiff effectively ends the possibility of any future litigation for that specific incident. Reaching a settlement can be advantageous for an at-fault party, as doing so may allow him or her to save time and avoid the costs of litigation.

How Long Does it Take to Receive a Personal Injury Settlement Check?

The time it will take to receive your personal injury settlement check will depend on the type of case (car accident, dog bite, slip and fall, etc.), the severity of your injuries, the extent of liability on the part of the defendant, and the complexity of the claim (i.e. whether the incident involved clear negligence, multiple parties, etc.).

In general, a straightforward motor vehicle accident or dog bite injury may be settled within approximately six months. However, the estimated amount of time it will take for you to receive your settlement check is something you will want to discuss with your personal injury lawyer during the free consultation phase.

At Dordulian Law Group (DLG), our dedicated and proven car accident and personal injury attorneys work tirelessly to ensure that clients receive the maximum financial compensation possible for claims in the minimum amount of time. We fight aggressively to ensure that your maximized settlement is recovered as soon as possible to allow you to get back on your feet and make a complete recovery.

Will My Lawsuit Settlement be Taxed?

Will My Lawsuit Settlement be Taxed?
In general – the answer to this question is “no.” While the Internal Revenue Service (IRS) states in its Tax Implications of Settlements and Judgments code that “all income is taxable from whatever source derived,” it’s important to also note that they have specific exemptions within other sections of said code. Specifically, the IRS does not tax settlement awards from personal injury lawsuits provided that the cases demonstrate “observable bodily harm.”

In other words, if you were injured in a car accident and your settlement went toward helping cover losses related to that injury – whether medical bills, pain and suffering, lost wages, or even emotional trauma – your award would not be taxable. However, if your settlement check was strictly for property damage sustained in a car or motorcycle accident, your award would likely be taxable given that it was not applicable to any injury endured.

Are Personal Injury Settlements Exempt From Tax?

In general, car accident and other personal injury-type settlements are almost always nontaxable. That said, it’s important to note that there are certain exceptions depending on the nature of your claim and injuries. Accordingly, when you receive your settlement check, it’s recommended that you discuss the potential tax implications with your attorney (and potentially a tax professional).

Will My Settlement Include Pain and Suffering Damages?

Pain and suffering compensation in a personal injury settlement constitutes what’s known as non-economic damages. Unlike economic (and easy to quantify) damages such as hospital bills and lost wages, calculating as well as proving pain and suffering requires the skill and experience of a great personal injury lawyer. Such damages are often viewed subjectively by defendants and their attorneys, which is why having an experienced car accident lawyer fighting to prove the severity of your pain and suffering is so important.

In general, if your accident involved a serious injury which led to pain and suffering, your attorney should absolutely pursue such damages within your claim. Moreover, if your personal injury or car accident lawyer is experienced in settlement negotiation, he or she should be able to maximize this specific aspect of your claim to ensure that the dollar figure recovered is a fair and accurate reflection of the pain and suffering you endured (and may continue to endure for some time).

Beware of the Statute of Limitations for Your Personal Injury Claim

While a settlement check can be the ticket to avoiding financial ruin and also ensuring that you are compensated for the harm and losses suffered after a car accident or dog bite, it’s critical to remember that you must file your claim within the statute of limitations.

In general, California imposes a two-year statute of limitations on personal injury claims. This means that you typically have two years from the date of an incident to file a civil lawsuit seeking financial compensation. However, it’s important to note that filing your claim immediately after an injury is strongly recommended. The sooner you file your claim, the grater the likelihood that you will be able to secure maximum financial compensation for your injury.

Contact a California Personal Injury Lawyer for a Free Consultation

At Dordulian Law Group (DLG), we believe that injured victims deserve top-rated and experienced legal representation without having to pay exorbitant upfront fees or out-of-pocket expenses. Suffering an injury in a car accident, dog bite, or slip and fall can be traumatic, and the last thing you should have to worry about during the difficult recovery process is added stress over expenses and unpaid bills.

For over 25 years, former Deputy District Attorney for Los Angeles County Sam Dordulian and his team of skilled personal injury attorneys have been helping local Los Angeles victims recover the maximum financial compensation they deserve. To date, we’ve secured in excess of $100,000,000 in settlements and verdicts for clients while maintaining a consistent 98% winning record.

Ready to file a claim and pursue justice through a financial damages award? Our expert attorneys are available online or by phone now.

With our No Win/No Fee Guarantee, you never have to worry about paying a penny upfront. If we don’t win your case, you pay nothing – it’s that simple. We’re confident in our abilities, and we will fight to recover the maximum financial damages award for your economic losses as well as any non-economic losses endured-like pain and suffering, emotional trauma, and psychological harm.

Contact us today at 818-322-4056 for a free and confidential consultation.

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