Text Us!

Are Personal Injury Settlements Taxable in South Carolina?

Posted on

The process to reach a settlement or jury trial award in a personal injury case can be a complex and exhausting process, especially since youre likely still in pain and dealing with ongoing medical treatments. Retaining a Lancaster personal injury attorney is highly recommended, as your attorney will protect your interests and help you to get the settlement you deserve.

Some people, especially those who handle their own cases, are unaware that come tax time, they may be responsible for some taxes. Its important that people are made aware of the potential tax implications of a personal injury settlement. There may be ways to structure the settlement amount so that you are not subject to the applicable taxes. This is one of the reasons it’s important to speak with a Lancaster personal injury attorney who can advise you on the best way to proceed.

 

Taxable Portion of a Personal Injury Settlement

Your entire settlement is not taxable since the idea behind a personal injury settlement is to make you whole again. Compensatory damages, which is money designed to compensate you for medical expenses, property damages, injuries, etc., are not taxable. These damages are reimbursing you for the money you already have spent or are spending, and therefore cannot be taxed. Its not new money nor a gift, so the law doesnt believe there is anything to be taxed. However, it gets more complex if you took deductions the prior year for medical expenses as you may be subject to taxes now.

The portion that is taxed is the amount you receive for lost income or future loss of earnings. This is money you would be paying income tax on if you were working. The original income you get if you were working would be subject to taxes, so the IRS wants their portion of this taxable income. In situations where you receive an award for loss of earnings as a lump sum, its important to remember that it could push you into a higher tax bracket. Your attorney can look to get you additional income to help cover the outstanding tax liability created by your settlement.

Determining whether pain and suffering compensation or compensation for emotional distress is taxable can be more complicated. In South Carolina, any compensation you receive that can be attributed to any type of physical injury is not likely to subject to taxes. If the compensation is for emotional distress that doesnt originate from a physical injury or sickness, it will need to be included in your income. You could be taxed then on an award for emotional distress. This is why its important to speak with a knowledgeable Lancaster personal injury attorney.

 

Punitive Damages in South Carolina

In the select few cases that include an award for punitive damages, these are always taxed. Punitive damages are not designed to compensate; their purpose is to punishthe at-fault party for their egregious or extremely reckless behavior. You may see an award for punitive damages in cases involving a drunk driver. Because punitive damage awards are often high, you can expect to have a corresponding high tax liability.

 

Retaining a South Carolina Personal Injury Attorney

If you have questions regarding the taxable aspects of a personal injury settlement, and/or you need representation for your pending case in Lancaster, contact the Elrod Pope Law Firm today at 803-599-3080 to schedule a consultation.

Get in touch with us today to get started with your FREE case review. We’re only a call, click, or short drive away.

*Disclaimer* The information contained in this Website is provided for informational purposes only, and should not be construed as legal advice on any subject matter. No recipients of content from this site, clients or otherwise, should act or refrain from acting on the basis of any content included in the site without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from an attorney licensed in the recipient’s state. The content of this Website contains general information and may not reflect current legal developments, verdicts or settlements. The Firm expressly disclaims all liability in respect to actions taken or not taken based on any or all the contents of this Website.

Any information sent to The Firm by Internet e-mail or through the Website is not secure and is done so on a non-confidential basis. Transmission of information from this Website does not create an attorney-client relationship between you and The Firm, nor is it intended to do so. The transmission of the Website, in part or in whole, and/or any communication with us via Internet e-mail through this site does not constitute or create an attorney-client relationship between us and any recipients.

Some links within the Website may lead to other web-sites, including those operated and maintained by third parties. The Firm includes these links solely as a convenience to you, and the presence of such a link does not imply a responsibility for the linked site or an endorsement of the linked site, its operator, or its contents.

This Website and its contents are provided “AS IS” without warranty of any kind, either expressed or implied, including, but not limited to, the implied warranties of merchantability, fitness for a particular purpose, or non-infringement.

Furthermore, The Firm does not wish to represent anyone desiring representation based upon viewing this Website in a state where this Website fails to comply with all laws and ethical rules of that state.

E-production, distribution, republication, and/or retransmission of material contained within The Firm Website is prohibited unless the prior written permission of The Firm has been obtained.

Any results achieved on behalf of one client do not necessarily indicate similar results can be obtained for other clients.

Fee Disclosure: If your case is taken on by the firm, the fee arrangement will be a percentage of the final value of the case as follows: up to 40% for litigation, 35% for pre-litigation, and 33% for workers comp. This calculation will be done before the deduction of expenses. Additionally, the client will be responsible for the expenses resulting from the case.