Are Wrongful Death Settlements Taxable?

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 can review your situation to determine your tax responsibility. An attorney can also help you file a claim and provide you with compassionate care and support.

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 and wrongful death attorney about any settlements awarded after a deadly accident before filing your tax return. These professionals can also answer questions like, “Are wrongful death settlements taxable?”

Do You Have to Pay State Taxes 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 and all potential taxable income to prepare for tax season.

How Much Are Taxes on Wrongful Death Settlements?

The tax rate for punitive damages for a wrongful death settlement 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.

Your lawyer can provide more information about handling a wrongful death claim while you work with a tax professional to discuss these payments and how they impact your taxable income.

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 through compensatory damages. Depending on your situation, the liable party may have to provide you with funds to cover your loved one’s:

• Burial expenses 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 or as settlement money.

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 through a settlement agreement or lawsuit.

Anyone who receives punitive damages after a wrongful death accident may have to cover the taxes associated with the settlement value. An attorney can provide more information about the taxable portions of a wrongful death claim.

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.

Your attorney will track all the losses your family sustained. You may receive funds to cover your economic and non-economic damages.

A lawyer can also answer any additional questions you have about whether or not wrongful death settlements are taxable.

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.

Keep in mind that you may not need to pay taxes for compensatory damages designed to cover a loved one’s medical expenses or burial costs.

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 monetary compensation and that compensation qualified as taxable.

For example, the personal representative should not have to pay taxes on compensatory damages after the loss of a loved one.

Learn About Taxation and Wrongful Death Lawsuit Settlements in NC

Are wrongful death 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 help from our professional and compassionate team at the Whitley Law Firm. We have over 120 years of combined experience that we can use to assist your family in securing a fair settlement in this challenging time.

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.