Personal injury cases as a result of wrongful death or anything else provide a means of compensation for the victim. Whether here in Utah or elsewhere, it can seem like another great injustice if this compensation is then taxed by federal or state law. That money is to make things better, so shouldn’t it all go to the victim?
As a general rule, there is no tax on personal injury rewards. However, there are some exceptions to the rule. Although wrongful death or medical expenses may be at hand, certain situations allow for taxation.
For one, if you breach a contract and end up with a physical injury or sickness as a result of that breach, you will still be taxed on damages related to the breach of contract. Also, punitive damages are always taxable. These are damages that exceed compensation and are merely awarded to punish the defendant.
In this case, it is a good idea to have your lawyer separate the compensatory and punitive damages with the judge in order to keep things straight. This ensures that part of the money, the compensatory part, will not be taxed.
Interest on the judgment is also subject to tax which is usually added to the verdict for the length of time that the case has been pending. Although this is taxable, it benefits the victim in the end because they can receive interest if a court date keeps getting pushed back. While it is taxable, it still provides some immediate relief.
Whatever the cause, make sure that you speak to a personal injury lawyer here in Utah or in your home state before diving into a compensatory case. Lawyers will ensure that you get the full compensation you deserve.