Award Taxes
If you’ve experienced a wrongful death in your family, whether from medical malpractice, corporation negligence, the misconduct of an individual, or other devastating situation, you may have gone through a lawsuit where your family collected wrongful death damages. These are often awarded to compensate anyone who was dependent on the person who passed away for economic support. The court can also award some compensation for pain and suffering, the loss of the ability to enjoy life, and even your own loss of companionship.
IRS Tax Laws
Usually, wrongful death damages are not taxable. Particularly, damages that are compensatory are not considered as income by the IRS because they are awarded for the purpose of compensating the family members for losses they have sustained due to their loved one’s passing, such as medical and funeral expenses.
Punitive Damages
In extreme cases where the party responsible for the tragedy is found to have been negligent or did something intentionally, this is where punitive damages may be awarded to the family to punish the responsible party and make an example of them so the situation is less likely to occur in the future to someone else.
Because these types of awards are above and beyond economic losses, the IRS does consider these as income and they can be all or partially taxed. Be aware that the IRS may look more closely at your case to determine if the monetary split between compensatory and punitive damages is accurate enough to reflect the true economic cost of the losses in question. It’s especially important in these cases to have an experienced wrongful death lawyer working with you to protect your damages as much as possible and prove your case regarding accurate economic losses on your part.
Differing State Laws
The state the case occurred in or the state the person who passed away lived in, will determine if punitive damages can be tax-exempt. Some states only award punitive damages to wrongful death claims. In these cases, the IRS does allow these awards to be exempt from income taxes.
Ensure Fair Compensation
To increase your chances of obtaining a fair settlement or court trial, it is highly recommended that you work with a wrongful death lawyer in Des Moines, IA. They can help you collect evidence to support your case and fully express losses as well as the pain and suffering you and your loved one have experienced. The lawyer can also work with you and the IRS to determine how much, if any, of your damages should be taxed.
Thanks to Johnston | Martineau, LLP for their insight into personal injury claims and wrongful death damages.
