Dealing with the aftermath of an accident is stressful enough; not knowing if your Personal Injury Settlement is taxable is another unnecessary worry. At James H. Brown, we provide all the information you need to rest and recover from your injuries without the additional stress of Personal Injury Settlement tax. Whether or not your settlement is considered taxable income depends on what kind of settlements you receive or what the cap is for your injuries. The following will explain how taxes work with common personal injury settlements in Canada.
What is a Personal Injury Settlement?
Personal injuries are any injury that occurs to the body. This term commonly includes whiplash, broken bones, and neck pain. It also includes serious or catastrophic injuries like spinal cord injuries and brain injuries. When you receive a personal injury settlement, you are being compensated for your injuries, loss of wages, medical bills, and more. What you do with this settlement is ultimately up to you, but you should know what that decision will mean for your taxes.
Is My Personal Injury Settlement Taxable?
Typically, no. However, it is more complicated than that. Personal injury settlement funds you receive from the province or territory as a victim of a motor vehicle accident (MVA) or a crime in Canada do not need to be claimed as income, as they are not taxable. This usually applies to slip and falls, car accidents and the like. Yet certain types of income related to personal injury settlements are taxable.
Direct Compensation Settlements and Punitive Damages
The settlement you receive is not always considered one form of settlement. Direct compensation settlements are the portion of the compensation for injury rehabilitation, bills, lost wages, and pain and suffering. This part of the personal injury settlement is not taxable.
It is possible to receive compensation on top of direct compensation by a private individual. This is known as punitive damages, which is a sum that will be paid by a defendant found guilty of committing a wrongful offense. You will be taxed on that portion of the settlement. If you are unsure what applies to you, contact our lawyers at James H. Brown and Associates.
Investing Your Settlement
If you choose to invest your settlement funds into anything that gives you interest, any income you make off of that original sum is taxable by the Canadian Revenue Agency (CRA). Anything above the sum you invested will need to be reported to the CRA as such.
Why Hire an Injury Lawyer After an Accident?
Personal injury lawyers will help you fight for fair compensation. Insurance companies can try to scare you away from pushing for your right to fight for fair compensation to avoid the complicated legal process. At James H. Brown and Associates, we do not let you navigate this process alone! The right injury lawyer can help you obtain a fair personal injury settlement.
James H. Brown and Associates recognize that the law is complicated, and knowing what part of your personal injury settlement is taxable is not intuitive. With our leading injury lawyers we can help you get the compensation you deserve. If you need legal advice, talk to one of our injury lawyers at James H. Brown and Associates today.
Contact James H. Brown and Associates for a Free Consultation
James H. Brown and Associates is a hard-hitting injury law firm in Alberta. We have studied the law in-depth and understand how to negotiate on your behalf to get you fair compensation. We have been fighting for compensation for injury victims since 1993 and have a proven record of success. Our team is ready to help you get the support, resources, legal aid, and compensation you need to recover from your accident. Contact us today to ensure you get the most out of your personal injury settlement.