When settlements are awarded during a personal injury case the money included can have a significant impact on the victim. It may not be clear, however, whether or not you will receive the full amount of compensation awarded in a car accident case or if the settlement is taxable. In general, your compensation will not be subject to taxation, but certain exceptions can apply. Speak to a York County, PA car accident attorney regarding your situation today.
What Types of Compensation Can Be Awarded After a Car Accident?
During any civil case, a few types of compensation can be awarded. Consider the following examples of damages that a victim of a car accident may receive.
- Economic: Economic damages are awarded for actual costs that the victim incurred due to the accident and injury. This can include repairing property damage, reimbursement for lost income during recovery, and covering the cost of medical care including surgeries, medication, rehabilitation, and more.
- Non-economic: An individual may be awarded non-economic damages for the emotional or psychological harm that was caused by the injury. This can include estimated costs for physical pain, PTSD, anxiety, depression, loss of enjoyment of life, disability, and more.
- Punitive: Punitive damages are awarded as a way to penalize the defendant for their behavior. It is only awarded in instances where the defendant acted with significant recklessness, negligence, or malice.
Economic and non-economic damages are considered compensatory as they are designed to compensate victims for real or intangible expenses. Punitive damages, however, simply act as a way to punish the defendant. The victim will reap the monetary reward of the court’s desire to teach the defendant a lesson.
Are Settlements Taxable?
In Pennsylvania, compensation received in a settlement is typically considered to be income and taxed as such. However, damages recovered due to personal injury are excluded from this rule. Generally, money received as a result of a car accident is not taxable because it is reimbursement as opposed to income.
Compensatory damages like economic compensation consider the costs that the victim is charged for medical care and expenses they incur due to limitations from their injuries. They will receive a settlement to provide them with the funds to pay off these costs. The victim is not gaining much, if any, income because they will use their compensation to pay off these bills.
Depending on the situation, however, some parts of a settlement could be taxed. Any compensation that is not directly related to the individual’s injury can be considered income. Punitive damages, while not always awarded during a car accident case, will be considered taxable income because they do not relate to expenses incurred from bodily harm.
Speak to a Pennsylvania Attorney
It is important to build a strong case with ample evidence to prove the financial and general effect that the accident and injury has had on your life. Generally, the more significantly you were impacted, the more compensation you will receive. Contact our skilled personal injury attorneys to set up a consultation today and begin discussing your rights and legal options.
