Do I Have to Pay Taxes on a Personal Injury Settlement?
If you were injured in a car accident or by someone else’s negligence, you might’ve filed a personal injury claim. Since a good percentage of personal injury claims tend to be settled outside of court, you might’ve found yourself with a cash sum amount awarded to you. With your settlement now entering your bank account, you might be wondering if you’re going to owe taxes on it. Well, we’ve got good news. When it comes to personal injury settlements and taxes, it’s a lot less complicated than you may think. Read on to determine whether you have to pay taxes on a personal injury settlement in Maryland.
Personal Injury Settlements and Taxation
According to the Maryland Civil Pattern Jury Instructions, personal injury settlements are not considered income under Federal and Maryland income laws. A personal injury settlement is considered to be compensatory damages that have been awarded to the Plaintiff, and any amount awarded to the Plaintiff as part of their damages is not taxable.
What This Means for Personal Injury Settlements
If you’ve received a personal injury settlement, you can rest assured that any compensatory damages you receive will not have to be taxed. That means that your award will not take taxes into consideration because you will not be paying taxes on your settlement amount awarded. This also means that your award will be a flat sum – meaning that you will not have any additional cash added to pay for taxes.
What Do I Do After Receiving a Settlement?
After receiving a settlement for a personal injury claim, you can use your cash settlement towards any outstanding medical bills to pay debts that you’ve accumulated while out of work, any expenses you need to take care of, or however you’d like to spend your funds. If you have any more questions about personal injury settlements, reach out to the legal team at Albers & Associates today!
Albers & Associates is Your Experienced Legal Team
Albers & Associates is your highly experienced Baltimore legal team. We can advocate on your behalf for the best possible resolution for your case. Our highly skilled legal team can expertly navigate your case and work with you during this difficult time. Contact us today for a consultation. You can also give us a call at our downtown Baltimore, MD office (410) 505-0671 or Dundalk, MD office (410) 505-7831.