Mesothelioma settlements provide crucial financial relief for victims and their families, but many wonder whether they will be taxed. In most cases, compensation for physical injuries, including mesothelioma, is not considered taxable income under federal law.
At Williams Law Firm P.C., we help clients navigate the legal and financial complexities of their claims, ensuring they receive the full compensation they deserve. With over 30 years of experience, lead attorney Joseph P. Williams has never lost a mesothelioma case, fighting tirelessly for asbestos exposure victims nationwide.
Mesothelioma is a serious type of cancer that could lead to years of hospital visits, doctor’s appointments, surgeries, chemotherapy and treatments. The medical costs alone related to mesothelioma can be immense. Luckily, victims with mesothelioma may qualify for financial compensation for their medical bills and other losses, including personal pain and suffering. If you qualify for a settlement, find out whether it will be considered taxable income and if you will need to pay taxes on your award.
Mesothelioma settlements are a crucial aspect of seeking compensation for individuals and families affected by this devastating disease. Understanding the tax implications of these settlements is essential to ensure that you receive the maximum amount of compensation you deserve. Navigating the complexities of the IRS tax code can be daunting, but being informed can help you avoid unexpected tax liabilities and make the most of your settlement.
A mesothelioma settlement is a payment made by a defendant, typically an asbestos manufacturer or distributor, to a plaintiff, which is the individual or family affected by mesothelioma. This payment is made in exchange for dropping a lawsuit. These settlements can provide financial compensation for a variety of damages related to the mesothelioma diagnosis, including medical expenses, lost wages, pain and suffering, and other related costs. The goal is to alleviate the financial burden on mesothelioma patients and their families, allowing them to focus on treatment and recovery.
Understanding the tax implications of mesothelioma settlements is crucial to ensure that you receive the maximum amount of compensation you deserve. The Internal Revenue Service (IRS) has specific rules and regulations regarding the taxation of mesothelioma settlements. Failing to understand these rules can result in unexpected tax liabilities, reducing the overall amount of compensation you receive. By being aware of these tax implications, you can better plan your finances and avoid any surprises when it comes time to file your taxes.
The average settlement value for a mesothelioma claim is $1 to $1.4 million. A mesothelioma lawsuit can result in significant financial compensation for victims, but understanding the tax implications is crucial. The average trial award is about $2.4 million. Taxation on such a large award could be considerable. For the most part, however, a personal injury settlement – including one for mesothelioma – will not be taxable. You will generally not have to pay taxes on any general or special damage awards under federal tax laws.
A general damage award reimburses you or your family members for losses anyone in your position would generally experience, such as physical pain, discomfort, chronic pain, emotional distress, mental turmoil, depression, anxiety, lost quality of life, diminished enjoyment of life, grief and loss of consortium. Special damages pay for losses related to your mesothelioma case specifically, including the exact costs of past and future medical care, lost wages, lost future capacity to earn and legal expenses.
The Internal Revenue Service (IRS) states that special and general damages for a physical injury or illness are typically nontaxable. Mesothelioma is a physical sickness, making it eligible for nontaxation. You will not need to list your mesothelioma settlement as earned income for the tax year unless an exception applies to your case. Exceptions exist for punitive damages and some special/general damages, depending on the circumstances. One exception, for example, is if you sought damages for emotional or mental suffering not connected to a personal physical illness. You will owe taxes on noneconomic damages not related to a physical illness.
Special and general damages are both compensatory awards. The courts grant plaintiffs compensatory awards to reimburse them for losses related to the injury or illness in question. Punitive damages are another type of monetary award a plaintiff could receive during a personal injury lawsuit. Punitive damages serve to punish the defendant instead of to reimburse the plaintiff. According to the IRS, punitive damages are taxable. You must report any punitive damage award received in a mesothelioma settlement as Other Income on line 21 of Form 1040, Schedule 1 come tax time.
Many mesothelioma patients deal with medical bills for years before finally receiving a settlement. If you receive a mesothelioma lawsuit settlement, it is important to understand the tax implications if you have previously deducted medical expenses. If in past years you listed your health care expenses as itemized deductions on your tax documents, you will have to pay taxes on them now. You cannot double-dip: receive money back for your medical costs by listing them as deductions and keep 100% of the settlement amount granted for your mesothelioma medical care. If you deducted mesothelioma expenses in any prior year to the extent that you received a tax benefit, you must list that same amount as income on your taxes this year.
Several factors can affect the taxes on mesothelioma settlements, including the type of claim, the amount of compensation, and the plaintiff’s income. Understanding these factors can help you navigate the complexities of settlement taxation and ensure that you comply with IRS regulations.
The type of claim filed can significantly impact the tax liability of a mesothelioma settlement. Personal injury and wrongful death lawsuits are common forms of legal compensation for those affected by mesothelioma. Generally, personal injury lawsuits are exempt from being taxed, as they compensate for physical injuries and related damages. On the other hand, wrongful death case settlements are not considered taxable, but any punitive damages awarded in these cases may be taxable.
It’s essential to consult with an experienced mesothelioma attorney to understand the tax implications of your specific claim. An attorney can help you navigate the complexities of the IRS tax code and ensure that you receive the maximum amount of compensation you deserve. By understanding the nuances of your claim type and potential tax liabilities, you can better plan your financial future and avoid any unexpected tax burdens.
Compensation for patients with asbestos-related illnesses may come from defendants who exposed the victim to asbestos or from one of the many national trust funds for mesothelioma patients. Mesothelioma lawsuits often result in settlements that can be complex to navigate, especially when it comes to taxation. Either way, it can be difficult to work through the matter of taxation after receiving a settlement for mesothelioma. Settlement taxation can depend on a few different factors, such as your previous tax documents and the damage categories awarded.
The best way to properly complete your taxes as the recipient of a mesothelioma settlement is to work with a certified tax professional, and an attorney can organize your mesothelioma settlement from the beginning to help you minimize your tax obligation and correctly pay what you owe come tax time. A lawyer can also help you maximize your financial recovery as someone with mesothelioma. Meanwhile, a tax professional can help you correctly file and pay your state and federal taxes, even with complicated factors such as a legal settlement.
Navigating the tax implications of a mesothelioma settlement can be overwhelming, but understanding your rights ensures you keep the compensation you deserve. At Williams Law Firm P.C., we help asbestos-exposure victims secure maximum financial recovery while guiding them through the legal complexities of their claims. Lead attorney Joseph P. Williams has never lost a mesothelioma case, using his 30 years of experience to fight for those impacted by negligent asbestos manufacturers.
If you have questions about your mesothelioma settlement or need legal representation to pursue compensation, we are here to help. Our team works tirelessly to ensure you receive the full financial relief you’re entitled to. Contact us today to discuss your case—call (855) 575-6376 or reach out through our contact form.
As the founding partner of Williams Law Firm, Joseph P. Williams has dedicated over 30 years to representing mesothelioma victims and their families. His firm has recovered hundreds of millions of dollars for those affected by asbestos exposure, offering personalized, aggressive legal advocacy. Based in New York, Williams Law Firm provides free consultations and handles cases nationwide.
