Car crashes are expensive, giving rise to numerous and varied costs, especially when injury is involved. These financial consequences can be devastating – without taking legal action, they can lead to decades of debt and even bankruptcy. Another one of the many reasons to pursue the financial compensation you deserve after being injured in a car crash is that personal injury recovery is not considered taxable income. The only exception to this rule is compensation received through punitive damages as that type of damages does not directly compensate for your physical and financial harm. It is widely understood that you deserve the financial compensation your Los Angeles personal injury attorney secures for you. That compensation is intended to address your lost wages, pain and suffering, medical costs, and more – a large portion of your recovered damages going to the government would undermine its intended purpose. Securing an experienced Los Angeles personal injury lawyer is crucial to protect the financial future of you and your family.
The team of award-winning personal injury lawyers at Arias Sanguinetti brings 300 years of combined experience in complex cases and will take your case all the way to trial if necessary. We have secured well over 1.5 billion dollars for our deserving clients through countless verdicts and settlements. We understand the impact that financial compensation can have for our clients who are dealing with the aftermath of a car crash – we will never settle for less than you deserve. To learn more about the financial compensation that you might be able to secure with our team and to schedule a free consultation – contact us today.
What are punitive damages and why are they taxable?
Punitive damages are one of the many forms of financial compensation we recover for our clients. It is important to note that the bulk of the compensation we recover for our clients is commonly non-taxable, compensatory damages. We pursue punitive damages in cases where the at-fault driver engaged in negligent behavior that led to your injury. Examples of actions by an at-fault driver that might justify pursuing punitive damages include:
- Drunk Driving. Drunk driving is commonly associated with criminal charges – it is less commonly known that it can also give rise to punitive damages as a civil claim.
- Intentional Harm. Similarly to drunk driving, an at-fault driver intentionally assaulting you with their vehicle can lead to criminal charges as well as augment any financial compensation recovered through a civil claim with punitive damages.
- Excessive Speeding. Speeding can be extremely hazardous to other drivers and can lead to punitive damages factoring into a civil claim.
- Known Defective Vehicle. This arises when the at-fault driver that injured you knew of a defect that led to your injury.
Broadly, any criminal activity on the part of a defendant in your personal injury claim can justify punitive damages. Punitive damages are taxable. Unlike compensatory damages which are tied directly to the harm you suffered, punitive damages are intended to create accountability for the defendant. It is not explicitly stated in the tax code, but in simple terms, punitive recoveries relate more to the defendant’s actions than to the losses you suffered, so there’s no reason the government shouldn’t take a cut. In compensatory damages, you are being compensated for damages and financial losses you have already suffered. If the government took a cut of that compensation, those damages would not, in fact, be compensated for in totality which is what you deserve. The lack of taxes on compensatory damages assures that you will be compensated 100% for the harm you suffered.
Once taxes have been taken out of the punitive damages, the remainder goes to the plaintiff. Punitive damages can be an effective means to maximize the financial compensation you deserve. Take action today – contact the Los Angeles personal injury lawyers at Arias Sanguinetti.
What are compensatory damages?
Compensatory damages are the main form of financial compensation you can expect to recover in your personal injury lawsuit. Compensatory damages include:
- Medical Expenses. This can be among the greatest expenses associated with personal injury.
- Lost Wages. Injuries commonly result in lost wages from time missed at work.
- Loss of Consortium. If a loved one has to take time off to help care for you, those lost wages can be part of a claim.
- Property Damage. Any damage to your car or other property can be part of compensatory damages.
- Pain and Suffering. The pain and suffering after a serious car crash can be severe – our team is passionate about securing pain and suffering compensation to help recover your quality of life.
- Diminished Earning Capacity. If your injury leaves you with a disability or in some other way restricts your future earning potential, we can help you tender a claim for those losses.
Compensatory damages are completely tax-free. These damages can make legal action a truly life-changing endeavor. Experiencing a car crash is traumatic – you deserve to have the financial needs created by this experience taken care of.
Arias Sanguinetti has a proven track record of top-notch personal injury representation. We are proud to work hard for our clients – contact us today.
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