Is Income from a Personal Injury Settlement Taxable in Michigan?

If you’ve received a legal settlement, it’s essential to consult with your personal tax advisor to be sure you’re observing current rules, regulations and tax laws. The following information is provided as a general guide.

A personal injury settlement is often critical to helping an injured person rebuild their lives. If you’ve suffered severe injures from an accident caused by someone’s negligence you many have incurred debt that can be overwhelming. We recognize that using a settlement effectively is crucial for our client’s recovery.

Naturally, concerns about taxation and settlements arise to avoid additional financial setbacks. With tax codes constantly changing and complexities in understanding compensation, it’s vital to know what you’re being compensated for and if taxes apply.

Tax Considerations for Personal Injury Settlements

It is natural to be concerned about taxation and settlements to prevent additional surprise financial setbacks. The tax codes are complicated and constantly changing, so understanding what you are being compensated for and if you owe taxes is vital.

Non-Taxable Settlement Amounts

In Michigan, compensation for bodily injuries generally isn’t taxable income either federally or at the State level. Economic damages, such as medical bills and lost wages, are also typically non-taxable. Non-economic damages, like pain and suffering or emotional trauma, are also non-taxable in personal injury settlements.

Taxable Settlement Amounts

In various types of employment cases (constructive discharge, discrimination, etc.) the settlements and judgements are almost always going to be going to be taxable at least in part. Also, federal cases involving punitive damages will have some tax consequences.

Navigating Tax Complexity

Understanding the tax implications of personal injury settlements can be challenging. Giroux Pappas can help guide you and recommend a tax attorney that can clarify the laws for you. Whether it’s determining taxable amounts or discussing tax relief for medical costs, we’re committed to providing clarity and advocating for your best interests.

At Giroux Pappas Trial Attorneys, we understand the financial strain severe injuries can bring after a Michigan accident caused by negligence. We know firsthand how overwhelming it can be to navigate debt while trying to recover. That’s why having an experienced Michigan personal injury lawyer by your side can make all the difference. Our team specializes in negotiating with insurance companies to ensure you receive the compensation you deserve.