There are only two sure things in life: death and taxes. You’ve probably heard the saying, and you understand how true it is. No one will escape death, though you never know when it will come. If a loved one unexpectedly passes away, you face a challenging recovery as you grieve over this person’s passing. If someone else caused this death, you should speak to an attorney about filing a lawsuit. A wrongful death suit could get you the compensation you deserve. Your lawyer will also help you understand whether you need to pay taxes on any money you receive from the settlement.
In the aftermath of an accident, your loved one could incur massive medical bills. Hospital stays, surgeries, medication and other treatments to keep the person alive could result in significant financial strain on surviving family members. A wrongful death settlement could include compensation for these payments. Also, funeral and burial costs can be expensive, but your settlement could help you take care of these needs. You could also be entitled to payment for income the decedent would have earned had he or she not passed away. This claim could be valid for past and future earnings. A good attorney also has the skills to help you recover damages for pain and suffering and for loss of companionship and enjoyment. The compensation for these claims can vary widely.
What Isn’t Taxable?
The federal government requires you to report any taxable income each year. Wrongful death lawsuit clients should understand how this affects their settlement. Your attorney will make sure you understand your rights and requirements. In most cases, you should not have to pay taxes on your award. The IRS has stated that compensatory damages are not taxable. This means payment you receive to cover medical bills, funeral costs, and lost income is yours to keep in full.
What Is Taxable
In some situations, however, you may have to pay taxes on your settlement and include this on your tax return. For emotional pain and suffering and for loss of companionship, you’ll have to pay taxes on those amounts. Punitive damages are also taxable. Individual states may have different rules on what is taxable on state returns. You should become familiar with these regulations. Your attorney will help you understand your obligations.
It is difficult coping with the loss of someone you love. The financial implications can be stressful as well. Fortunately, a skilled wrongful death lawyer, like a wrongful death lawyer in Woodland Hills, CA, will guide you through the process.
Thanks to the law offices of Barry P. Goldberg for their insight into what taxes someone must pay after getting compensation for a wrongful death.