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Have you or a loved one been diagnosed with Mesothelioma, lung cancer or an asbestos-related disease?

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Mesothelioma Settlements and Taxes

When a mesothelioma victim wins his or her court case, the individual will likely be awarded damages to compensate him or her for the illness. Those who are awarded these monies may have some confusion over whether this source of income is taxable.

The answer is not always clear cut, as the IRS has specific rules on court-awarded monies. Individuals may find that all of their settlement money is tax-free while others may find that only portions are tax-free and the other portions are taxable.

When Are Settlements Tax-Free?

Typically, the only monies awarded in a court settlement that are tax-free are those awarded for personal injury. Mesothelioma cases are usually considered personal injury claims, but it is important to note that not all money awarded for personal injury is tax-free.

Personal injury monies are considered tax-free when they are in the form of:

  • Special damages – compensation for pain and suffering
  • General damages – compensation for expenses arising from the injury

Any compensation awarded for other reasons is not tax-free and is considered taxable like regular forms of income.

When Are Settlements Taxable?

In mesothelioma cases, there are two notable forms of compensation that are taxable. These forms of compensation are:

  • Punitive damages – extra compensation meant to punish a person for his or her negligence
  • Compensation for lost wages or profits

These forms of compensation are considered taxable income under all circumstances, so an individual should report these sources of income on their taxes.

Contact Us

Taxation on settlements should not be a deterrent to seeking compensation when you have been the victim of mesothelioma. If you or someone you love suffers from mesothelioma, please contact the mesothelioma lawyers of Williams Hart, LLP, at 800-781-3955 to learn more about your legal rights.

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