With a few exceptions, the money damages you recover when you settle a New Jersey car accident lawsuit will not be taxable either by the federal government or the state. These damages receive tax-favorable treatment because they are intended to compensate a car accident victim for losses and injuries. Therefore, they are not considered to be income or investment gains.
At Kantrowitz, Goldhamer & Graifman, P.C., we help our clients recover the largest available damages awards. We use our knowledge and experience in personal injury and car accident lawsuits to structure settlements and jury awards so that no part of a client’s recovery is subject to taxation.
Car accident settlements compensate a victim for losses
Indivduals frequently suffer significant unanticipated losses as a result of a car accident, including:
- Current and future medical expenses
- Wage losses when the victim is unable to work while recovering from injuries
- Pain and suffering that injuries and property damage impose on the car accident victim
- Expenses associated with occupational therapy and rehabilitation
- Impairment of relationships with family and friends
A car accident lawyer will break down all of these costs and expenses. Your lawyer will also verify that these expenses are thoroughly described and defined in the final settlement agreement that the victim signs with the parties liable to reimburse them. The damages award that makes the victim whole will not be subject to income or capital gains tax withholding
Certain types of damages that are not reimbursement of a victim’s losses may be taxable
In a small number of car accident lawsuits, the defendant’s conduct might have been so egregious as to warrant an award of punitive damages. These are not reimbursements of actual losses but instead, penalize the liable party’s gross negligence or willful misconduct. Punitive damages awards are taxable because they are not compensation for an injured party’s losses.
Further, if an accident settlement is delayed and accrues interest, it will be deemed to be taxable income. Last, if a settlement award is characterized as compensation for emotional injuries and not the victim’s physical injuries, the settlement amount will also be subject to withholding taxes.
An experienced car accident lawyer will verify that your settlement payment is not subject to taxation
Car accident settlements are generally documented with settlement agreements that describe the reasons and purpose of the amount. A car accident victim can avoid unforeseen tax complications by retaining a car accident lawyer. They will review the final agreement and negotiate any clarifications that may be required to prevent federal or state tax authorities from taking a piece of the full settlement award.
Call Kantrowitz, Goldhamer, & Graifman to confirm that your car accident settlement is not taxable
To improve your chances of recovering the largest, tax-free settlement award in Bergen County or anywhere else in New Jersey, contact us for a private and confidential consultation. We will evaluate your case, explain all of your options, and negotiate your settlement to allow you to retain the full amount of your damages with no tax liabilities.