This question can have a few different answers. Generally, you do not have to pay taxes on car accident settlements, however, some compensated damages are taxable. The compensation from property damage you receive from a car accident should not be taxed (however, please advise with your tax/financial advisor). There are multiple reasons you may receive compensation from a car accident, and this will help determine whether or not your car accident settlement is taxable or now.

You must keep in mind the things you may be compensated for such as property damage, loss of wages from being unable to work, pain and suffering due to your injuries, medical expenses as well as negligence to the at fault party, because this will differentiate what you will be taxed on.  When it comes to a tax assessment for wages lost during your time of recuperation it can be a little precarious because of the fact that you can be taxed for quite a few years on your income depending on how many years you receive your settlement. Punitive damages are typically taxable, so when discussing what type of damages you are being compensated for, be sure to ask your attorney this falls under that category. As stated above, consult with your tax advisor for a more concrete answer due to every car accident claim having unique factors and different damages.

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