Are Wrongful Death Lawsuit Settlements Taxable?

Are wrongful death lawsuit settlements taxable in North Carolina? Generally, the federal and state governments do not tax wrongful death settlements if they’re considered compensatory. However, you may face taxes on some portions of the settlement.

A Raleigh wrongful death lawyer from our team at the Whitley Law Firm can review your situation to determine your tax responsibility. We can also help you file a claim and provide you with compassionate care and support.

Learn more about a wrongful death lawsuit by calling or completing our online contact form.

Does the Government Tax Wrongful Death Settlements?

The Internal Revenue Service (IRS) has instituted rules regarding damages received on account of personal physical injuries or physical sickness. This rule applies to wrongful death claims, making settlements for these claims largely nontaxable.

However, certain portions of a settlement may become taxable. For example, the government may tax any funds received as punitive damages. Punitive damages do not directly cover your family’s losses. Instead, they penalize the at-fault party.

It’s essential that you speak with a tax professional about any settlements awarded after a deadly accident.

Do You Have to Pay State Tax on a Wrongful Death Settlement?

North Carolina typically follows the same rules as the IRS for taxing a wrongful death settlement. You should not have to pay taxes on these funds unless part of the settlement includes punitive damages.

Make sure you speak to a tax professional about your financial responsibility to prepare for tax season.

What Damages do You Get Through a Wrongful Death Lawsuit?

A wrongful death lawsuit can allow your family to seek financial relief after a fatal accident. Depending on your situation, the liable party may have to provide you with funds to cover your loved one’s:

• Burial and funeral expenses
• Hospital and other medical expenses
• Pain and suffering

Wrongful death claims also provide families with damages for the loss of a loved one’s:

• Income
• Protection
• Care and assistance
• Companionship and comfort
• Advice and guidance

The government should not tax the above damages. However, you may have to pay taxes on any punitive damages awarded through a wrongful death lawsuit.

Who Receives Damages for a Wrongful Death Case?

Understanding who gets the money in a wrongful death lawsuit in NC can help you prepare for tax season. Generally, North Carolina allows close family members, including a surviving spouse, child, or parent, to receive damages.

Anyone who receives punitive damages after a wrongful death accident may have to cover the taxes associated with the settlement value.

How Much Compensation do You Get Through a Wrongful Death Lawsuit?

The court system awards varying amounts of damages for wrongful death claims. A lawyer can push to bring your family fair compensation that can help alleviate the financial pressures you face after a deadly accident.

Our team will track all the losses your family sustained. We believe in representing your best interests and providing you with compassionate support throughout the legal process. Contact us today to learn more about your next steps.

When do You Have to Pay Taxes for a Lawsuit Settlement?

You may have to pay taxes on any punitive damages awarded after a fatal accident. Generally, you’ll have to pay these taxes for the year you receive the funds. However, the payment schedule for the settlement may vary.

You can speak with a lawyer or tax professional to determine when you need to report the settlement to the government.

How Much Are Taxes on Wrongful Death Settlements?

The tax rate for punitive damages will vary based on several factors, including your tax bracket position. Your total income for the year may determine your overall tax rate, including the percentage of taxes you face for any punitive damages.

Our team can provide more information about handling a wrongful death claim while you work with a tax professional to discuss these payments.

Can Anyone File a Wrongful Death Lawsuit?

North Carolina only allows a personal representative to file a wrongful death lawsuit. Sometimes, individuals name a representative in a will or other legally binding document. In other cases, the court has to assign a representative.

However, the representative may not receive any damages through a wrongful death lawsuit. The representative would only have to pay taxes if they received damages and those damages qualified as taxable.

Learn About Taxation and Wrongful Death Lawsuit Settlements in NC

Are wrongful death lawsuit settlements taxable in North Carolina? Typically, the federal and state government only tax punitive damages awarded from a wrongful death lawsuit. You generally do not have to pay taxes on other damages your family receives.

You can learn more about wrongful death cases and get professional help from the Whitley Law Firm. Call or complete our online contact form for a free case evaluation.