As the weather begins to get better, and we enter into spring, many of us begin to think about taxes and tax refunds. Often this brings about an important question that many of our Maryland auto accident clients will have for us about their settlements. One of the more common is: Do I have to pay taxes on my accident settlement money?
The simple answer is No. In Maryland, your proceeds from an injury settlement, specifically one for an automobile accident, are not subject to income tax. This is even the case if some of the settlement amount is negotiated to include time you may have missed from work.
This means, when we settle an accident case for you, don’t go looking for the tax forms from our office or from the auto insurance company that paid the claim. It also means that you do not need to self report the settlement proceeds to your accountant, CPA, or to whatever tax software you might be using to do your own taxes.
What about the medical bills that were paid from my settlement? This is a great question that we almost never get, but try to bring up to all of our accident clients. Part of the settlement, which is shown in our settlement breakdown sheet, are any outstanding medical bills that are paid from settlement proceeds. Sometimes the medical expenses are high enough that they can cause you to receive a tax deduction. This is a question more specifically geared toward your accountant or CPA, but if that is the case, and copies of those medical bills are ever needed for those deductions, we can quickly provide them to our clients.
Legal fees and case costs, however, are typically not subject to a tax deduction in cases like this.
We regularly work with our clients well after their cases are resolved to provide important documentation like this, whether it be for tax deductions, or to substantiate the existence of large deposits after a settlement for the purposes of purchasing or refinancing a house. We can even work with your mortgage lender, or your CPA to make sure they’ve got what they need with the proper documentation to take care of your specific situation.
Looking for help with a Maryland automobile accident which caused injuries? Want to make sure you receive a fair settlement that pays all of your medical bills and compensates you for pain and suffering? Call or text our office now at 667-220-6500 for a free consultation or to get us started working for you! You can also visit us @bowerslawmd