Our Chicago personal injury attorneys at the Mancini Law Group, P.C., have successfully represented clients throughout Illinois, securing over $100 million in compensation for our injured clients.
For over 30 years, we have pursued maximum justice and maximum results for each individual or family we have had the opportunity to represent, and one question often goes unasked until it is time to file their taxes the following year: “Will I have to pay taxes on my personal injury settlement or judgment?”
Like most tax questions, the answer is, it depends.
Here is why.
The State of Illinois Tax Laws are Not Representative of Other States' Statutes
Generally speaking, compensation received because of a judgment or settlement in Illinois is not taxable as gross income.
Instead, the money awarded for the person's injuries or illness, medical bills, or property damage is interpreted as compensation because it directly addresses the underlying losses and therefore is not taxed.
Our Illinois Personal Injury Settlements and Judgments Taxed by the Federal Government?
Whether you pay federal taxes on compensation received from a personal injury settlement or judgment depends on the type of injury sustained how the financial award is allocated in the terms of the agreement.
Compensation from physical injuries or sickness is generally not taxable.
Compensation for emotional distress because of a physical injury or sickness is not considered taxable income either.
However, funds awarded as punitive damages, designed to punish the negligent party for their egregious behavior and to keep others from committing the same actions or inaction are taxable because they do not directly affect the injured party's losses.
Talk to a Local Tax Professional to Determine the Status of Your Personal Injury Compensation before Filing
An injured party can determine which portion of his or her settlement or judgment is subject to taxes based on the paperwork associated with the verdict or settlement. Our skilled Chicago personal injury lawyers can help outline that information, so you know what is and is not taxable.
However, if you attempt to allocate a non-exempt amount to address injury claims to avoid paying a larger amount in taxes, the IRS may penalize you accordingly.
To avoid any inadvertent allocation of funds for taxable purposes, consult a tax professional to ensure that you comply with both federal and state tax laws.
Contact Our Chicago Personal Injury Attorneys at Mancini Law Group P.C Now
If you or someone you love has been injured by another person or party's negligence in Illinois, contact our experienced Cook County personal injury attorneys at Mancini Law Group P.C by phone at 773-745-1909 or online to schedule a free, confidential consultation to discuss your case today.
