When you file a wrongful death lawsuit, your goal is to receive money for the damages that you incurred due to the loss of a loved one. Of all lawsuits, this is one of the toughest to fight because it is so emotionally charged. After all, no amount of money is going to make up for the loss that you suffered, but it can help you to pay for any costs associated with the death, any financial losses that you suffered and more. However, the big question that you may be wondering is whether or not the IRS can touch this money. Well, here is what you need to know about taxes and wrongful death claims.
Compensatory Damages and Taxes
Compensatory damages are not taxable. If the jury finds that a person owes money for damages associated with the death, then that award may not be subject to taxes. For instance, costs associated with illness and death relating to the case and other forms of compensation are not considered income and hence are not taxable. You do not have to pay taxes on these numbers. However, there are awards that you may have to pay a tax on.
Punitive Damages and Taxes
Punitive damages are different from compensatory damages. If you are awarded punitive damages, this means that the person acted in such a grossly negligent way that the court seeks to punish him or her through the costs. The costs associated with punitive damages are not considered compensatory. For courts that do provide victims with punitive damages, there are different rules in place. These costs are not exempt from taxes. Likewise, if you sue a person for lost wages, that is considered income. When you receive that money, it may be subject to the IRS. It is important to know that there are some damages that the IRS does consider to be income or that they can tax. While most compensatory damages are untouchable, punitive damages are touchable.
When you are worried about the taxes on your wrongful death damages, you do not normally have to think about it. Compensatory damages are not normally taxable. When you receive your settlement, you can focus on putting the money towards your losses, rather than worrying about the taxes. However, when it comes to punitive taxes, that is a completely different situation. You may be taxed. To find out more about your particularly wrongful death case, contact a wrongful death lawyer, at the law firm of PIOLETTI PIOLETTI & NICHOLS.