Is My Personal Injury Settlement Taxable in Illinois?
In Illinois, a personal injury settlement is generally not subject to taxes. Personal injury settlements are usually tax-free because the settlement proceeds are not considered gross income — the money awarded for the person’s injuries, medical bills, or property damage is interpreted as compensation for a loss. There are certain exceptions when a portion of the personal injury settlement may be taxable in Illinois. While it’s necessary to discuss the details of your case with an experienced Illinois personal injury attorney, what follows is some basic information about whether a personal injury settlement is taxable.
Taxes and Personal Injury Settlements
When is a Personal Injury Settlement Tax-Free?
If a personal injury settlement offers compensation for physical injuries, then that portion of the settlement amount is generally not taxable because it is not considered earned income. When the personal injury settlement provides a reimbursement for medical bills related to hospitalization or doctors’ visits for the injury, the settlement is usually tax-free.
When do you pay taxes on a personal injury settlement?
If a portion of a jury verdict is identified as punitive damages, the amount of the punitive damages are taxable. While the award for a personal injury is generally intended to compensate the person for his or her loss, punitive damages serve the purpose of punishing the defendant for willful, wanton, or reckless actions.
Contact Rubens Kress and Mulholland to Discuss Your Options
Rubens Kress and Mulholland is a Chicago law firm with extensive knowledge related to personal injury cases and our attorneys have a proven track record of success. Our experienced team of Illinois personal injury attorneys is committed to ensuring that you receive the compensation that you deserve, and we charge no fee unless you collect. To learn more and discuss your legal options, contact Rubens Kress and Mulholland online, at (312) 300-2270, or toll-free at (866) 938-4713.