Understanding when Personal Injury Compensation is Taxable in Illinois
Our Chicago personal injury attorneys at Mancini Law Group, P.C. have successfully represented injured clients throughout Illinois personal injury cases, securing over $100 million in compensation for accident victims and their families.
For more than 30 years, our Illinois personal injury lawyers have pursued maximum justice and maximum results. One important question many clients do not ask until tax season arrives is:
Will I have to pay taxes on my Illinois personal injury settlement or judgment?
As with most tax-related issues, the answer depends on how your personal injury settlement is classified.
Illinois Personal Injury Settlement Tax Laws Explained
Under Illinois tax laws, compensation received from a personal injury settlement or judgment is generally not considered taxable income.
Money awarded for physical injuries, medical expenses, illness, or property damage is viewed as compensation for losses suffered and is typically excluded from gross income for tax purposes.
Are Illinois Personal Injury Settlements Taxed Federally?
Whether your personal injury compensation is subject to federal taxes depends on the type of damages awarded and how the settlement is structured.
In most cases:
- Compensation for physical injuries or physical sickness is not taxable
- Compensation for emotional distress tied to a physical injury is also not taxable
- Punitive damages, however, are taxable because they are meant to punish the negligent party rather than compensate the injured victim
Understanding how damages are categorized is essential when determining your tax obligations.
Why You Should Speak With a Tax Professional
Before filing your taxes, it is critical to review the documentation related to your Illinois personal injury settlement.
Our experienced Chicago personal injury attorneys can help explain which portions of your settlement may be taxable. However, attempting to improperly allocate funds to avoid taxes may result in IRS penalties.
To ensure compliance with both Illinois and federal tax laws, consulting a qualified tax professional is strongly recommended.
Contact Our Chicago Personal Injury Attorneys
If you or a loved one has been injured due to another party’s negligence, contact our experienced Cook County personal injury lawyers at Mancini Law Group P.C. today.
Call 773-745-1909 or contact us online to schedule a free, confidential consultation.
Your need for justice is our passion for justice.
