In most cases, wrongful death settlements are not taxable. Under federal guidelines from the Internal Revenue Service (IRS), the compensatory damages that you receive as part of a settlement for physical injuries or physical sickness that result in death are excluded from gross income.
However, there are potentially taxable portions of a wrongful death settlement. For example, pre- or post-judgment interest earned on your settlement amount while waiting for resolution can be subject to taxation.
The West Palm Beach wrongful death lawyers at GOLDLAW can teach you about the tax implications of settlements. Our attorneys can help you file a wrongful death claim or lawsuit.
From here, we can negotiate a settlement with a liable party or their insurance company that provides you with fair compensation for the harm that you and your family have suffered.
Are Wrongful Death Settlements Taxable in Florida?
In Florida, compensatory damages that cover the medical bills that the deceased person (decedent) incurred before death, this individual’s funeral and burial costs, and the loss of financial support that you face due to their death are typically not taxed. Meanwhile, in many instances, the damages awarded for loss of companionship are also non-taxable.
Since Florida has no state income tax, any non-taxable portion of a wrongful death case settlement is not subject to state taxes, but federal tax rules from the IRS still apply.
At GOLDLAW, our West Palm Beach personal injury lawyers want to help you understand the potential tax implications of your wrongful death settlement. To do so, we can assess your losses, estimate your case’s value, and seek compensation based on the loss of your loved one. If you get a settlement, we’ll help you protect against a significant tax burden.
For a free legal consultation, call 561-222-2222
When Is a Wrongful Death Settlement Taxable?
Even though many sections of a wrongful death settlement aren’t taxed, there are times when some portions are subject to taxation. The potentially taxable portions of a wrongful death settlement can include:
- Interest: Pre- or post-judgment interest included in a settlement or judgment is generally treated as interest income.
- Prior medical deductions: If you deducted certain medical costs from your taxes in a previous year, you can be taxed on medical expense payouts in your settlement.
- Punitive damages: These damages, which are meant to punish a liable party rather than compensate you and your family for your loss, can be taxed.
The wrongful death attorneys at GOLDLAW can give you information about the tax implications of settlements and judgments. Along with this, we can provide tips and recommendations to help you get a settlement that matches your expectations.
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How to Limit the Tax Implications of a Wrongful Death Settlement
GOLDLAW has attorneys on staff who know what counts as a wrongful death in Florida and what it takes to secure compensation from anyone liable for the death of a loved one. In your situation, we may advise you to do the following to limit your settlement’s tax implications:
- Partner with a tax professional. Together, you, your attorney, and your tax professional can evaluate a settlement offer and its tax implications. If a settlement will leave you with a steep tax bill, we can continue to negotiate on your behalf.
- Explicitly allocate your settlement funds. The IRS relies on settlement language to determine what portions of your wrongful death settlement are taxable. Because of this, our attorneys want to make sure that your settlement agreement clearly designates funds as compensatory damages rather than leaving portions ambiguous.
- Separate interest. Account for pre- and post-judgment interest and try to keep it as low as possible during settlement negotiations. This interest is fully taxable as income.
- Review your prior tax deductions. Check to see if medical expenses paid by a settlement were claimed as itemized deductions on past tax returns. If so, some or all of that reimbursement may need to be included in your taxable income under the tax benefit rule.
The GOLDLAW team can explain the things to do after a wrongful death. Along with this, we want to remove the guesswork from the taxation of wrongful death settlements.
Our wrongful death lawyers will keep you updated about these negotiations and if any settlement offers are made. If no agreement is reached, we are prepared to bring your case to trial.
Call or text 561-222-2222 or complete a Free Case Evaluation form
Learn More About Whether a Wrongful Death Settlement Can Be Taxable
The loss of a family member is devastating emotionally for you and your loved ones. In the middle of a wrongful death case, you may not be thinking about the short- and long-term tax implications of any decisions you make. Thankfully, you have access to the wrongful death attorneys at GOLDLAW.
Our firm has more than 200 years of combined legal experience. Our wrongful death attorneys can address the taxability of settlements in Florida. In addition, if you want help with negotiating a settlement in your wrongful death case, we’re here for you.
Our attorneys resolve many cases in under a year. Plus, our lawyers work on a contingency fee basis, and there are no fees or costs unless we win. Get GOLDLAW and get the help you need and compensation you deserve. Contact us today.
