Do You Have To Pay Taxes On Your Personal Injury Settlement In Nevada?

Nobody likes to go to court or get involved in legal work unless it becomes necessary. Getting injured due to the negligence of another party forces you to get busy with legal paperwork. This is not fair, but sadly, that is how the world works. Among the legal worries, you can add the IRS as well because the compensation you receive from the liable party may be taxable. 

However, the answer is much more complex than a simple yes or no. For the most part, this compensation is not taxable. But there may be certain consequences. If you want to know more about this or have any questions regarding your legal case, you can visit this website: highstakesinjurylaw.com.

How much of your personal injury settlement in Nevada is subject to taxes?

Typically, there are no taxes on the compensation you receive from the at-fault party in Nevada. The major damages, including medical expenses for physical harm and emotional injuries and property damage, are not considered taxable under federal law. If you got money from a settlement to cover medical bills and you previously claimed those bills as a deduction on your taxes, then that settlement money might be taxable.

Here is a simple breakdown of settlement damages and if they are taxable:

• Physical injuries or illness: Typically non-taxable.
• Medical expenses:  Taxable.
• Lost wages: Fully taxable as they are considered to be your income. 
• Lost profits: Taxable for the same reasons as lost wages. 
• Punitive damages: Fully taxable.
• Interest on judgment: Fully taxable. 

Do you need a tax planning expert as well?

Yes. If you are expecting all of the damages mentioned above in your compensation claim, you should consult with a tax planning attorney immediately. In most cases, your personal injury attorney should be able to tell you which parts of your compensation are taxable and which parts are not. 

However, it is always recommended to consult an expert. After all, your attorney deals with personal injury law, and a tax preparer pays taxes for a living. 

A tax preparer can add value to your case. They can work with your attorney to determine an estimate.

The payment for your lost wages and income is subject to the biggest tax amount. 

Can you obtain a non-taxable settlement?

If you have been in a severe accident with many injuries, you will likely want to obtain lost wages, which makes it impossible for it to be non-taxable. 

When it comes to taxes, it is crucial to report all earnings accurately. If you are unsure about reporting a settlement, it is wise to consult with an attorney.