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Is my settlement taxable?

Is My Settlement Taxable? Everything You Need To Know About Your Settlement

“Do I have to pay tax on my personal injury settlement?” is one of the most common questions asked by our clients. The short answer is, no. Although there are some exceptions to this rule along with certain taxable services surrounding your personal injury claim. Read on to see “is my settlement taxable?”

Why Isn’t My Personal Injury Award Taxable?

A personal injury award, whether achieved through a court process or settled out of court, is non-taxable as proceeds from a personal injury claim are not “taxable income” under the Income Tax Act. This means you do not need to report your award amount on yearly income tax returns. If you mistakenly report your award as income, the CRA will tax you and you must go through a reassessment process to rectify the error.     

Under What Circumstance Is My Personal Injury Award Taxable?

As previously noted, proceeds from a personal injury claim are non-taxable in and of themselves. However, there are certain things you can do with your award which would incur a tax liability. For instance, if you decide to invest your personal injury award, any income earned off that investment is taxable.

If the Award Itself Is Not Taxable, Is Anything Else Taxable?

If you retain a personal injury lawyer to represent you in a lawsuit, there is tax associated with that lawyer’s services. In the same way that you must pay 5% GST on services rendered by a hairstylist or yard maintenance company, you must also pay 5% GST on professional services rendered by your lawyer. For example, if a lawyer’s commission is $5,000, you must pay the CRA 5% GST on top of the commission. In this example, you would owe $250.  

An Award-Winning Team to Get You Results

Today, James H. Brown and Associates has an award-winning team of experienced professionals committed to attaining justice and getting our clients the compensation they deserve for their injuries. Our team proudly offers a complete range of services and support for our clients throughout the legal process, including:

  • An award-winning team of lawyers with over 200 years of combined experience in accident injury law.
  • Comprehensive investigation and evidence preservation services, including accident reconstruction and analysis.
  • Access to experts able to determine the full extent of injuries and provide important documentation for your case.
  • Strong relationships with organizations ready to help you and your family with rehabilitation and recovery.
  • And much more!

Have You or a Loved One Been Injured?

Contact us today to book a free, no-obligation consultation with James H. Brown and Associates Alberta Injury Lawyers.