Will Motor Vehicle Accident Settlements Be Taxed?

Finally obtaining that settlement money is oftentimes grounds for celebration for the plaintiff. That money will go into paying their medical bills, making up for lost income, and just generally putting their life back on track after it was disrupted by the accident. But will that settlement be taxed?

Medical Expenses

General damages, sometimes also called compensatory damages, include medical expenses, damages for pain and suffering, as well as emotional trauma, and loss of consortium, among other things. These damages cannot be taxed according to the Canada Revenue Agency, since their purpose is to support you during your recovery and nothing more. This ensures that you are not worried about anything while you recover.

Income Loss and Future Earnings

Since compensation for your income loss and future earnings is meant to replace the wages, you normally would have brought in, they will be taxed as your wages would be, which is by the CRA and according to your regular tax rate. However, you might want to talk with a financial advisor or a injury lawyer that understands the intricacies of such claims.

Damage Awards For Vehicle And Property

Similarly, to the compensation for medical expenses, the awards granted to you for damages done to your vehicle or property will not be taxed. Their purpose is to help you replace what you lost and nothing more. You need to consult with a personal injury lawyer in North Bay to know more about the claim.

Punitive Damages

The purpose of punitive damages is to punish the defendant. This is why they are rarely used in connection to settlement awards. The defendant’s actions must be intentional and deeply malicious for a court to inflict these damages on the defendant, since they are meant to scare them off from ever committing such an act again. However, if punitive damages have been granted to you, they will be taxed. This is because they are not meant to help replace your losses, or help you through your recovery, but to help punish the defendant and discourage them from future wrongdoing. However, the defendant is only fined or has to pay compensation

Obtaining A Car Accident Lawyer

Should you ever be involved in a motor vehicle collision which has left you injured, you should get an injury lawyer in Collingwood involved. They will help you gather evidence to prove the negligent party liable, and they will also ensure that you obtain the compensation you are entitled to, which can be difficult when you have to deal with insurance companies and their adjusters by yourself. Thus, it becomes important to work closely with a lawyer.