When someone dies due to negligence or because of another person’s actions, then you may need to file a wrongful death lawsuit. If you file a claim and win, then you may feel a lot of relief initially. One of the worries that people have when there is a wrongful death claim is what you owe the IRS when it comes to damages.
If you receive a settlement or award from a wrongful death lawsuit, you may be unsure of what to do next. Do you have to add the award to your federal income tax liability? these settlements may be large and you do not want to worry about owing a lot of money to the IRS. If you’re wondering if your claims are taxable. Here is what you need to know.
Non-Taxable Damages
In reality, you should not have to claim your wrongful death suit on your taxes for the year. this is not a cut and dry rule, however. The IRS has regulations regarding wrongful death lawsuits. If the court awards you because of injury or physical injury, then these are non-taxable damages. Wrongful death settlements are usually non-taxable. This is money that you receive because a third party is responsible for the death.
Taxable Damages
Now, when it comes to wrongful death, there are taxable damages. Most of your settlement should be untouchable by the IRS. You will not have to report it. however, for other damages, you may have to. If you are awarded additional punitive damages or payments for lost wages or pain and suffering, then you may have to pay taxes on them. Financial awards in these instances may be subject to taxes. If you have to claim these damages, then you will have to include them on your tax forms.
Business Deductions
If an organization causes the death of your loved one, you may be wondering if they are allowed to deduct the cost from their taxes. The answer goes both ways. Most lawsuits cannot be filed on either person’s taxes. If a company causes the death of another person through negligence or through carelessness, the company cannot add the expenses as a deduction on tax forms.
Wrongful death lawsuits and taxes can be complicated. It’s not unusual to be confused by what you’re supposed to add to your tax return. For any questions that you have regarding your wrongful death lawsuit, call a wrongful death lawyer today. He or she will be willing and able to answer any of your wrongful death questions.
