If you have recently filed a mesothelioma lawsuit that could possibly lead to a significant payout, you will want to know whether or not the settlement or award is taxable. After all, it’s important to know how much money will be yours to spend and how much will go to the government.
The taxation on mesothelioma lawsuit settlements is often complex and whether the settlement you receive is taxable or not will mainly depend on the type of compensation you are awarded. Typically, the only monies awarded in a court settlement that are considered as tax-free are those for personal injury– and mesothelioma lawsuits are usually considered as personal injury claims. However, not all monies that are awarded for a mesothelioma personal injury claim are tax-free.
What Mesothelioma Lawsuit Settlements are Non-Taxable
Mesothelioma personal injury settlements are considered tax-free when they are in the form of Special Damages and General Damages. Special damages settlements are compensation for pain and suffering as a result of mesothelioma and may include personal injuries and emotional distress. In the case of emotional distress, there are two scenarios that determine whether the settlement will be taxed or not. One, if you become so emotionally distressed that you become ill, then the compensation you will receive will be taxable. On the other hand, if your emotional distress is directly linked to your mesothelioma illness, then the compensation becomes tax-free. In some cases though, if you become emotionally distressed because a loved one was diagnosed with mesothelioma or died as a result of the illness, the compensation may or may not be taxed.
General damages settlements are compensation for expenses arising from the injury and may include medical bills and related costs, as well as wrongful death.
What Mesothelioma Lawsuit Settlements are Taxable?
As a victim of mesothelioma, you may receive a form of compensation that is taxable. In this case, there are two types of taxable settlements that you may be awarded;
- Punitive damages
- Compensation for lost wages or profit
Unlike general damages, punitive damages is a form of compensation that is not aimed at covering the cost of your medical expenses and related costs. Rather, it is awarded in addition to actual damages in some circumstances. Punitive damages are considered a punishment, and are awarded to a mesothelioma victim so as to hold the defendant liable for their negligence.
It’s important to note that regardless of why punitive damages were awarded, they are always taxable. This is usually done because punitive damages do not provide compensation for the monies that the defendant lost either by spending it or not being able to earn it. It’s also important to note that in the U.S., punitive damages that are awarded to families in mesothelioma wrongful death lawsuits are tax-free.
The second type of mesothelioma lawsuit settlement that is taxable is one that concerns compensation for lost wages and profits. This simply means that once you receive this form of compensation, you will be required to report it on your taxes, regardless of the circumstances.
Taxation on mesothelioma lawsuit settlement should not deter you from seeking compensation. It’s therefore advisable to seek the assistance of a qualified and skilled mesothelioma attorney who will guide you through the entire process and ensure you get the maximum compensation.
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