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redbl

Query on non-taxable compensation for the personal injury settlement

8 posts in this topic

Hi,

I have some doubts to clear.

My wife slipped and fell from the office building steps and it was due to the poor lighting and not placing the cautionary board on the wet steps. She suffered a fractured leg. We are planning to claim the settlement for personal injury from the landlord. 

 

Now, my doubt is this. My wife was having sciatica condition and she has been under the medication. The fall has in a way increased the pain on her leg but fortunately, it's not deteriorated. I am hoping to get compensation for it. I read on this blog about the settlements ( http://thelawfirm.com/taxable-income.html ) that the compensation not related to the injury caused during the incident is taxable. I will quote the sentences from the blog

 

"There are some monies however that are generally taxable. For example, the amount received in a personal injury settlement attributed to interest is generally taxable. Compensation received for emotional distress and mental anguish not directly related to physical injury or physical sickness is taxable. Defamation, invasion of privacy, discrimination, harassment, and wrongful termination would be examples of taxable money. Regardless of the type of case, punitive damages are generally taxable. Finally, a settlement award with compensation for lost wages or loss of income is taxable and must be reported on a tax return. "

 

I would like to know if my wife will be entitled to compensation for her elevated sciatica pain and that she gets a nontaxable compensation for the mental anguish she is facing now due to it. Please, share your opinion and advice.

 

Thanks in advance.

 

 

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12 hours ago, redbl said:

I would like to know if my wife will be entitled to compensation for her elevated sciatica pain and that she gets a nontaxable compensation for the mental anguish she is facing now due to it.

 

Damages paid for physical injury and pain and suffering are generally not taxable.  This portion of the statement you quoted is confusing:  " Compensation received for emotional distress and mental anguish not directly related to physical injury or physical sickness is taxable."  I have never heard of "pain and suffering," "emotional distress," or "mental anguish" damages being awarded other than in relation to "physical injury or physical sickness," but maybe whoever wrote that is referring to the relatively rare occasions in which such damages are awardable without physical injury.  Obviously, this is something about which your wife should consult with her attorney.

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Hi @redbl

 

Welcome to the Answers community! Thanks for your post! Your wife may want to speak with an experienced personal injury attorney about her options for recovery of damages due to her accident. An experienced attorney can advise you about the various types of damages and the tax ramifications of each.

 

For a free case evaluation, click here, or use the FindLaw Lawyer Directory to search for qualified attorneys by city and state.

 

Best of luck and keep us posted!

The FindLaw.com Team

 

 

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4 hours ago, FindLaw_RE said:

Hi @redbl

 

Welcome to the Answers community! Thanks for your post! Your wife may want to speak with an experienced personal injury attorney about her options for recovery of damages due to her accident. An experienced attorney can advise you about the various types of damages and the tax ramifications of each.

 

For a free case evaluation, click here, or use the FindLaw Lawyer Directory to search for qualified attorneys by city and state.

 

Best of luck and keep us posted!

The FindLaw.com Team

 

 

 

Thank you. I will go through the links and see.

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On 11/8/2016 at 11:21 PM, redbl said:

I would like to know if my wife will be entitled to compensation for her elevated sciatica pain and that she gets a nontaxable compensation for the mental anguish she is facing now due to it. Please, share your opinion and advice

 

 

There are two questions in there:

(1) Is your wife entitled to compensation for the increased pain from the sciatica?

(2) Would any compensation for the increased sciatica pain and anguish be taxable income?

 

As to the first question, that depends on the applicable state tort law, but generally if the plaintiff can prove that the accident caused by the defendant aggravated a pre-existing condition the plaintiff would be entitled to compensation for the additional harm created, but of course would not be liable for the underlying pre-existing condition itself. The problem is that proving that the injury aggravated that pre-existing condition is often hard to do, and then there is the challenge of separating out what is additional damage caused by the accident as opposed to what is related to the pre-existing condition.

 

The answer to the second question is pretty straightforward. The compensation for the additional pain/anguish is due to a physical injury and thus would not be taxable income to the plaintiff.

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On 11/9/2016 at 8:38 AM, pg1067 said:

This portion of the statement you quoted is confusing:  " Compensation received for emotional distress and mental anguish not directly related to physical injury or physical sickness is taxable."  I have never heard of "pain and suffering," "emotional distress," or "mental anguish" damages being awarded other than in relation to "physical injury or physical sickness," but maybe whoever wrote that is referring to the relatively rare occasions in which such damages are awardable without physical injury.

 

FYI, this was poorly written on my part.  The point I was attempting to make was that, generally, the sorts of damages mentioned are only available when accompanied by physical injury.  However, there are a few cases in which they might be available otherwise (e.g., false imprisonment and intentional infliction of emotional distress), but those are fairly rare.  And, in any event, it's not really relevant to your wife's situation.

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