Does The Federal Government Have The Power To Tax Florida Personal Injury Settlements?
As long as the settlement award was for physical injuries then the answer is no. Personal injury settlements for cases when the plaintiff was physically harmed are not taxable on the federal level. This means that the federal government cannot collect taxes from your personal injury settlement as long its compensation for physical injuries and their consequences. This is good news for those of you who have been injured in an accident in Florida and want compensation for your injuries.
For awards in physical injury cases, the federal government does not tax your settlement money since your settlement is based on the injuries you sustained in the accident. This is also the case for economic damages, such as medical bills and lost wages, and for non-economic damages, such as pain and suffering and emotional distress.
Generally, compensation received for physical injuries or physical sickness is not taxable. This means that if you receive a settlement or an award as a result of a personal injury case, and the payment is specifically for physical injuries or physical sickness, you will not have to pay taxes on that portion.
However, if you were awarded damages but were not physically injured, then the federal government can tax those damages.
There are certain instances where your settlement may be subject to taxation:
Interest on the settlement: If your settlement includes interest, that portion is generally considered taxable income.
Punitive Damages: These are damages that are awarded in a case to punish the defendant for particularly egregious behavior, and they are considered taxable.
Emotional distress or Mental Anguish related to your injuries: If you receive damages for emotional distress or mental anguish if it is not connected to a physical injury, then this may be taxable.
Lost Wages and Lost Profits: If your personal injury settlement includes compensation for lost wages or lost profits, then that portion of the settlement is taxable.
What About Florida State Taxes?
In the state of Florida, there is no state income tax, so a personal injury settlement is not Taxable.
There are some indirect ways where you might get taxed in Florida.
Sales Taxes: One way is if you use your personal injury settlement to purchase goods or services, you may be subject to state sales taxes.
Property Taxes: If your settlement results in the acquisition of real estate property or you use the funds to improve your own property, you may be subject to property taxes in Florida.
Corporate Taxes: If your personal injury settlement is related to your business, then you may receive Florida’s corporate income tax on your settlement.
Your Personal Injury Lawyer at the law firm of Goldman, Babboni, Fernandez, Murphy & Walsh can help you determine if your settlement is taxable and how much of your settlement may be subject to taxation if they have represented your case in Florida. Contact our law firm to schedule your free consultation today.