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Do You Pay Taxes on Personal Injury Settlements?


If you have been injured due to the negligent actions of another, you may be entitled to financial compensation. But many injury victims hesitate to pursue litigation because they take a look at the bigger picture, and worry that being awarded a settlement will result in serious tax consequences. 

Fortunately, this may not be as big of a burden as you think. Continue reading to learn more about the compensation you can be awarded for non-taxable damages and when you can expect to pay taxes in your Baton Rouge personal injury settlement.

Recovering Compensation for Non-Taxable Losses

First, let’s take a look at the various losses you may recover in your personal injury settlement in Baton Rouge that are not subject to state or federal taxes. This includes both economic and non-economic damages.

Economic damages are the losses that have impacted your life financially. The following economic damages will not be taxed if you are awarded compensation for them in your personal injury settlement:

Next we have non-economic damages. These are the losses that you have endured that have nothing to do with money. They are often more difficult to quantify, as they do not have a set monetary value, but they are also equally if not more valuable. 

The following non-economic damages are not subject to state or federal taxes as part of your Baton Rouge personal injury settlement:

  • Pain and suffering
  • Lost quality of life
  • Inconvenience
  • Reputational damage
  • Scarring
  • Loss of companionship and love
  • Emotional distress
  • Disfigurement

When You Will Be Taxed on Your Personal Injury Settlement

Although the vast majority of the losses you are able to recover are not taxed when you are awarded a personal injury settlement, there is an exception.

Any compensation you are awarded for your lost wages and lost future earnings may be subject to both state and federal taxes. This is because they are considered income and are treated the same way they would be if you were being taxed on them directly out of your paycheck. 

Your lawyer will make sure to keep a thorough record of what portion of your injury settlement will be considered lost wages so you are only taxed on this amount specifically and not the entirety of your Baton Rouge personal injury award.  

Get in Touch with a Baton Rouge Personal Injury Lawyer

Now that you have a better understanding of when you will pay taxes on a portion of your settlement, you may be more comfortable reaching out to an attorney to seek the compensation that is rightfully yours. 

Contact a reputable Baton Rouge personal injury lawyer at Spencer Calahan Injury Lawyers to discuss the details of your case. You can schedule a free consultation by filling out the brief contact form included below or giving our office a call at 225-387-2323.