Do You Have to Pay Taxes on a Settlement From a Truck Accident?

Imagine you just received full compensation for being involved in a trucking accident. You can use this money to fix your car, pay medical bills, or buy a new car. But you may be thinking, “Do I have to pay taxes on my settlement?” Fortunately, the short answer is no. You won’t have to pay taxes on most motor accident settlements.

However, there are cases where some of your compensation is taxed. To fully understand how much of your settlement is taxable, reach out to a personal injury attorney or a tax attorney.

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Types of Compensation

There are several different types of compensation you can collect in a truck accident settlement. The first is measurable and objective, which are your medical bills and lost wages. You may also be able to collect emotional damages, which include any pain and suffering you endured.

a view from the top of the entrance to the hospital and a modern ambulance with a red cross parked near the emergency entrance

Compensation for Medical Expenses and Injuries

As part of a personal injury settlement, you can receive compensation for surgery, hospital stays, and physical therapy. The victim usually has to pay medical expenses out of pocket. So, any payment you receive for medical expenses or injuries is not taxable. The money you are receiving is a reimbursement, not actual income.

Compensation for Vehicle and Property Damage

Any compensation you receive for vehicle damage resulting from a motor accident is not taxable. The payment covers the amount it costs to repair your car or reimbursement from a rental car. Similar to medical expenses, you are getting reimbursed for out-of-pocket expenses.

Man taking pictures of a broken car after an accident. A driver in a reflective vest in the background calling car accident injury attorneys
Man taking pictures of a broken car after an accident. A driver in a reflective vest in the background calling car accident injury attorneys

Compensation for Vehicle and Property Damage

Any compensation you receive for vehicle damage resulting from a motor accident is not taxable. The payment covers the amount it costs to repair your car or reimbursement from a rental car. Similar to medical expenses, you are getting reimbursed for out-of-pocket expenses.

person holding their bandaged hand

Compensation for Lost Income

After a motor accident, victims may be in considerable pain for a significant amount of time. Hospital stays, doctor visits, and physical therapy appointments can force the victim to take a lot of time off work. Any compensation you receive for lost income is tax-deductible. Your regular income is taxed, so any payment you receive from loss of wages is also taxed.

Compensation for Emotional Distress

An accident is a shocking event that could bring much emotional distress. Compensation for emotional distress is tricky when it comes to what’s taxed. This form of compensation may be taxable, depending on the situation.

For instance, if you’re in a car accident and sustain severe back pain. You may fall into a depression that requires medicine and regular therapy visits. Since your distress comes directly from the injury, these costs will not be taxed.

However, say you’re in a car accident and witness your child or spouse become seriously injured. Watching a family member get hurt is very traumatic, and you may receive compensation for it. Since the damage in this example does not arise from your physical injury, this compensation is taxable.

woman on a couch with a headache from a concussion and hand on her forehead
woman on a couch with a headache from a concussion and hand on her forehead

Compensation for Emotional Distress

An accident is a shocking event that could bring much emotional distress. Compensation for emotional distress is tricky when it comes to what’s taxed. This form of compensation may be taxable, depending on the situation.

For instance, if you’re in a car accident and sustain severe back pain. You may fall into a depression that requires medicine and regular therapy visits. Since your distress comes directly from the injury, these costs will not be taxed.

However, say you’re in a car accident and witness your child or spouse become seriously injured. Watching a family member get hurt is very traumatic, and you may receive compensation for it. Since the damage in this example does not arise from your physical injury, this compensation is taxable.

What If I Receive Punitive Damages?

It’s rare for punitive damages to be part of a motor accident settlement. This category of personal injury damages is a punishment against the defendant, and they get awarded if the defendant engaged in outrageous behavior. In any case, punitive damages are always taxable.

Speak With an Experienced Personal Injury Attorney in New York

The rules about paying taxes on your truck accident settlement can be complicated. Once you receive your compensation, it’s essential to speak with your attorney before filing your tax returns. A top-rated personal injury attorney at The Barnes Firm can help navigate your case’s complexities and answer any questions you may have.

At The Barnes Firm, our top priority is ensuring that all our clients receive high-quality representation. We’ll fight for you to receive the compensation you deserve and help you understand what part, if any, is taxable. Reach out to The Barnes Firm to discover all the ways we can help you after a motor accident. Complete our online contact form or call us today to schedule a free consultation.

The Barnes Firm (800) 800-0000