If you or a loved one recently suffered a personal injury due to the actions of any other party, a Denver, CO, personal injury attorney can help you hold them accountable and secure compensation for the damages you suffered. However, any personal injury case has the potential to escalate into a very complex legal affair, and it is natural to have many questions and concerns about how your case will unfold and the potential outcomes you might see after succeeding with your claim.
Taxation Is a Common Concern
One of the most common concerns among personal injury plaintiffs is taxation. You could be entitled to claim a sizeable amount of compensation from the defendant who caused your injury, so it is natural to worry about how much of your case award is subject to taxation. Fortunately, for most personal injury plaintiffs, personal injury settlements do not qualify as income.
Compensation Available in a Personal Injury Claim
The main objective of any personal injury case is for the plaintiff to prove liability for the damages they suffered and to obtain compensation for those damages from the party responsible for causing their injury. This process can unfold in many ways, and each plaintiff will face unique challenges as they seek compensation for their damages. Under Colorado’s personal injury statute, the plaintiff in a civil suit has the right to claim compensation for the losses they suffered because of the defendant’s actions, which are likely to include:
- Medical treatment costs. The defendant who injured you is liable for all medical care you need to recover as fully as possible. This includes the cost of future treatment if your injuries are severe enough to require ongoing rehabilitative care.
- Property damage. If the defendant damaged or destroyed any of your personal property with their actions, these losses can be cited as economic damages in your personal injury claim.
- Lost income. When you are unable to work due to your injury, the defendant is liable for the income you are unable to earn during this time. This can apply to lost future income as well if the injury was serious enough to cause a permanent disability, and you won’t be able to return to work in the future.
- Pain and suffering. You can hold a defendant accountable for the physical pain and emotional distress they caused. However, State law limits how much you can receive, even if you suffered a permanent injury.
The compensation you receive from a successful personal injury claim is intended to repay a loss. Therefore, the Internal Revenue Service (IRS) and the Colorado Department of Revenue do not consider a personal injury settlement as taxable income. There are exceptions to this rule depending on the type of losses you suffered, whether you receive punitive damages, and other factors.
Ultimately, it’s a good idea for any personal injury plaintiff to consult a tax professional at the conclusion of their case. Every taxpayer must be sure to meet their tax obligations to avoid penalties at the federal or state level.
Q: Are Personal Injury Settlements Taxed as Income?
A: State law recognizes a personal injury settlement as a repayment of a loss, not income. The same applies to the IRS at the federal level. Therefore, there is no federal or state income tax applied to your personal injury settlement. However, if you are awarded punitive damages as part of your case award, this element of the settlement may be eligible for taxation.
Q: How Do I Avoid Paying Taxes on a Lawsuit Settlement?
A: There is generally no need to worry about avoiding taxation on your personal injury settlement. The IRS and Colorado Department of Revenue do not consider personal injury settlements as income. The proceeds you receive from your successful claim generally do not qualify as taxable income. However, if you are claiming compensation for the income you were unable to earn due to the defendant’s actions or if you receive punitive damages as part of a case award, these items may qualify for taxation.
Q: Should I Hire a Tax Professional to Help With My Personal Injury Claim?
A: As you reach a settlement in your personal injury case, your attorney may be able to refer you to a local tax professional who can help resolve any tax-related concerns you may have about the proceeds from your case. It is generally advisable to work with an experienced tax professional if you have any concerns about your tax obligations.
Q: How Long Will It Take to Receive My Settlement From a Personal Injury Case?
A: A good attorney may be able to settle your personal injury claim within a few weeks, but if you must litigate your case, this could take several months to resolve. After you reach a settlement or a judge has ordered a case award in litigation, it should only take up to 30 days to receive your settlement payout. Your attorney can help you understand the timetable of your recovery.
Q: How Much Does It Cost to Hire a Personal Injury Attorney?
A: The Law Firm of Jeremy Rosenthal can provide comprehensive personal injury representation without adding to your financial concerns with overly expensive legal fees. We take clients on a contingency fee basis, meaning that our firm will only take a percentage of the total amount we recover for you. Additionally, you only pay your contingency fee if we win your case, and you owe nothing if we are unable to secure compensation for you.
It’s natural to have lots of financial concerns in the aftermath of any personal injury, and the right attorney on your side can enable you to approach this challenging situation with confidence. The team at the Law Firm of Jeremy Rosenthal has years of experience handling a wide range of cases and we’re ready to leverage this experience for you. Contact us today to schedule a free consultation and learn more about the legal services we can provide.