Will you owe taxes on your car accident settlement? It will depend on what types of compensation you receive. Get more detailed information here.

Is the settlement from my car accident case taxable?



When you receive a settlement in your auto accident case, much of it is generally not subject to taxes. However, there are a few types of compensation that are taxed or that could be. Here are types of compensation you could receive:

  • Medical expenses
  • Lost wages
  • Pain, suffering, and emotional distress
  • Property damages
  • Punitive damages

Here, we will explain the tax implications of each of the types of damages you might receive in your settlement or at a jury trial.

Medical Expenses

Reimbursement for your medical bills is generally not taxed. However, if you took a deduction for out-of-pocket medical expenses on your federal income tax return last year, you will need to pay taxes on this portion of your settlement.

Lost Wages

The lost wages you receive are to compensate you for the wages that you did not get while you were off work recovering from your injuries. Like your earnings, the amount you obtain for this in your settlement is taxable.

Pain, Suffering, and Emotional Distress

It can be more complicated to determine if the proceeds you receive for your pain, suffering, and emotional distress are taxed. Generally, these types of damages are lumped together as pain and suffering compensation. You will not owe taxes on the pain and suffering compensation caused by bodily injuries. However, if you receive money specifically for emotional distress for non-bodily injuries, such as depression, anxiety, or post-traumatic stress disorder, this amount would be taxed.

Property Damages

This one is simple. You should not owe any taxes for reimbursement for damages to your vehicle or property inside it.

Punitive Damages

Punitive damages are only awarded to punish the negligent driver when his actions are especially outrageous. They are not frequently part of a car accident settlement but would be taxed if they are awarded in your case.

Contact Us for Help

If you were injured in an auto collision caused by a negligent driver in the Seattle area, our experienced car accident attorneys are here to guide you through the process of filing your claim and to fight for your right to a fair settlement. We can also give you further guidance on the taxability of your settlement. To learn about our extensive experience in these cases and to get your questions answered, call our office today to schedule your free initial consultation.