If you have been diagnosed with mesothelioma, you may be entitled to financial compensation. But are mesothelioma settlements taxable? According to the Internal Revenue Service (IRS), personal injury compensation is not taxable, while punitive damages and lost wages are taxable. This article will provide an expert's guide to understanding if your financial agreement will be taxable. Mesothelioma lawsuits usually end before the case reaches trial, commonly referred to as a settlement.
Sometimes cases go to trial and end with the jury's verdict, either in favor of the plaintiff or the defendant. Under Section 104 of the IRS code, the same taxes apply to settlements granted before a trial begins and to compensation for the jury's verdict.Generally, lawsuit settlements granted for physical injury or illness (such as mesothelioma) are tax-exempt. Typically, mesothelioma lawsuits consist of personal injury and wrongful death lawsuits. People who have been diagnosed with mesothelioma (or another disease caused by asbestos) tend to file personal injury lawsuits.
On the contrary, family members, caregivers and friends can file a wrongful death lawsuit.Personal Injury Lawsuits Are Generally Tax Exempt. These cases compensate plaintiffs for the consequences of their cancer diagnosis, such as lost wages, medical costs, and travel expenses. In cases where plaintiffs provide adequate documentation to support their expenses, they are generally exempt from taxation. Similarly, wrongful death settlements are not considered taxable.The proceeds of these cases are usually the result of compensatory damages.
However, in some states, wrongful death settlements are classified as punitive damages against the negligent company. Tax Code, Punitive Damages Are Taxable. Unlike compensatory damages that reward plaintiffs for injuries, punitive damages penalize companies for their actions.A court may also award punitive damages in addition to compensatory agreements to discourage future corporate negligence. Some tax laws allow a portion of punitive damages not to be taxable.
Consult an experienced asbestos attorney or certified public accountant (CPA) for details on applicable state and federal tax laws.The IRS recognizes asbestos settlements (including trust fund claims and jury verdict amounts) as the same type of non-taxable income in most cases. The IRS generally does not tax mesothelioma settlements until a set “cap” or percentage is established.On the other hand, certain aspects of an agreement total could be considered taxable. Another part of your agreement that could be taxed includes aggregate settlement amounts for “emotional distress” or “mental distress”. However, Section 104 only protects from taxes settlements of “personal physical injury or physical illness”.While patients suffer many physical effects of emotional distress (such as the physical effects of depression and anxiety), this part of a settlement is still taxable.
A common form of tax liability for mesothelioma settlements is taxes due on interest.Your settlement may accrue interest while it is being processed. In addition, if you choose to receive settlement payments instead of a lump sum, your agreement is likely to earn interest. Interest is taxable regardless of the type of statutory asbestos claim that has been filed. The IRS taxes liquidation and investment interest in a similar manner.In most cases, mesothelioma lawyers work with contingency fees.
In this case, plaintiffs don't have to worry about paying a withholding fee or other upfront costs when signing a contingency fee contract with an asbestos lawyer. Instead, your lawyers deduct your payment from the settlement total. In addition to legal compensation, patients with mesothelioma and their family members often rely on other forms of income and benefits. Certain types of disability and retirement income are taxable, while others are not.
An accountant can give you the best advice for your finances. Do you think you were exposed? Request a case evaluation to determine the cause and who is responsible. In general, compensation from a mesothelioma settlement is not taxable. Under the IRS Tax Code, compensation awarded in connection with a diagnosis of mesothelioma is not subject to taxation.
For example, lawsuit payments for medical expenses are generally not taxable. Thus, the victim can receive the proceeds of an indemnity agreement in less than 90 days, based on an average time frame of mesothelioma settlement. He has represented families affected by mesothelioma and asbestos-related diseases in almost every state. Notably examples of asbestos agreements provide information on how award amounts may vary from case to case.
There are different circumstances that can affect taxes and the overall outcome of your settlement agreement.