A wrongful death is the loss of life that is caused by the negligent or reckless actions of another individual. Although you may be entitled to monetary compensation for the wrongful death of a loved one, you need to be aware that your settlement or judgment or portions thereof may have certain tax implications.
For more information about the tax implications of your wrongful death settlement, it is in your best interest to consult with an Irvine wrongful death lawyer.
Labeling the Settlement Makes a Difference
The IRS draws a line between compensatory and punitive damages when it comes to the taxation of personal injury settlements, including monetary settlements for wrongful death claims.
Compensatory damages are intended to compensation you for your loss and allow you to return to your life as it used to be prior to the wrongful death of a loved one. The IRS will not take a share of the compensatory portion of your wrongful death settlement or judgment awards. However, one exception to this rule is that compensatory damages for emotional distress and mental anguish may be taxable for the amount exceeding the medical costs that were not deducted.
Punitive damages, on the other hand, are a different matter where the IRS is concerned. These types of damages are generally awarded when your loved one’s death was particularly outrageous or egregious. In other words, punitive damages are generally awarded as a form of punishment and the IRS wants a share in the proceeds.
Since California tax laws frequently change, you should consult with an Irvine wrongful death lawyer in order to determine whether your wrongful death monetary settlement or judgment or portions thereof is subject taxation.
Call Us Before It’s Too Late!
For more information about the tax implications on wrongful death monetary compensation, call the Law Offices of Samer Habbas at 888.848.5084 to schedule a complimentary consultation with one of our experienced Irvine wrongful death lawyers.