Are Mesothelioma Settlements Taxable Income?
Some of the money awarded in a mesothelioma settlement is considered taxable income, while some of it is not.
When an asbestos lawsuit is settled, victims are usually awarded financial compensation for one of two reasons, which affect whether it will be taxed.
Money is typically awarded for:
- Personal injury compensation: Personal injury awards allow mesothelioma victims to cover their medical bills, protect their family’s financial security, and help pay for any other expenses associated with this disease. Personal injury awards are not taxable, according to the U.S. Internal Revenue Service (IRS).
- Punitive damages: Punitive damages are not awarded to cover a victim’s injuries but to punish manufacturers of asbestos-containing products. The American Bar Association (ABA) notes that punitive damages are always taxable, with no exceptions.
There are some exceptions to these rules. For example, if a victim’s medical expenses were deducted on their tax return before a settlement, they may have to pay taxes on some of the money they receive.
There are many other individual factors that affect taxes and settlements, and it is hard to know exactly how these factors will impact each case without legal help.
Victims can work with an experienced lawyer to learn how taxes may affect their mesothelioma settlements. These lawyers can make the legal process easier and help victims receive the most compensation possible for their case.
Quick Facts About Mesothelioma Settlement Taxes
- Tax codes and laws, including those that affect settlements, are managed and enforced by the IRS.
- Both settlements and trial verdicts are taxed in the same manner, according to the ABA.
- Federal, state, and local laws may all affect how mesothelioma settlements are taxed.