ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

Are Medical Malpractice Settlements Taxable?

Updated on August 16, 2016

When a patient has gone through the harrowing experience of suffering medical malpractice, and has successfully obtained compensation for their injury, they may be unsure of how the tax code applies to their court award or settlement. As with most tax-related issues, the answer to whether or not a medical malpractice award is taxable is not a completely straightforward one.

Source

For tax purposes, there is no difference between a malpractice award won at trial or a settlement obtained through negotiation. (In fact, the vast majority of malpractice cases settle out of court.) In a medical malpractice claim, a patient must prove that the negligence of the medical professional treating them led to physical injury. That point is important for tax purposes, because IRS policy states, “If you receive a settlement for personal physical injuries or physical sickness and did not take an itemized deduction for medical expenses related to the injury or sickness in prior years, the full amount is non-taxable.”

However, malpractice victims cannot automatically assume that their entire settlement amount is non-taxable. According to the expert attorneys at Hodes Milman & Liebeck LLP, there are important exceptions to the general principle that award amounts connected to a physical injury are exempt from taxes. For example:

  • In many states, victims may be awarded interest on a judgment dating from the date the case is filed until the date the award or settlement is paid. Such interest is taxable.
  • If the victim took a tax deduction on medical expenses incurred as a result of their injury prior to receiving their settlement, and a portion of the settlement is meant to compensate them for those bills, then that portion of the settlement may be taxable.
  • Any punitive damages are taxable.
  • Emotional damages are generally considered tax-free to the extent that they are connected to the physical injury a patient suffered.
  • While settlements for lost wages are usually considered taxable, that may not always be true, depending on the circumstances of the case.

In addition, while most state tax codes follow federal guidelines for medical malpractice settlements, it is always wise to double-check that this is the case in your state.

Knowing the differences between how categories of compensation are treated under tax law is important for structuring a settlement in a way that will retain the maximum amount for the benefit of the malpractice victim. An experienced malpractice attorney will not just fight for the maximum award possible for the plaintiff, but will do so in such a way that the compensation they receive is not reduced by avoidable tax obligations.

If you or a loved one has been a victim of medical malpractice, contact knowledgeable, professional attorneys that have the expertise to fight for your rights and obtain the compensation you deserve.

Comments

    0 of 8192 characters used
    Post Comment

    No comments yet.

    working

    This website uses cookies

    As a user in the EEA, your approval is needed on a few things. To provide a better website experience, hubpages.com uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

    For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at: "https://hubpages.com/privacy-policy#gdpr"

    Show Details
    Necessary
    HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
    LoginThis is necessary to sign in to the HubPages Service.
    Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
    AkismetThis is used to detect comment spam. (Privacy Policy)
    HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
    HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
    Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
    CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
    Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the googleapis.com or gstatic.com domains, for performance and efficiency reasons. (Privacy Policy)
    Features
    Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
    Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
    Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
    Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
    Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
    VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
    PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
    Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
    MavenThis supports the Maven widget and search functionality. (Privacy Policy)
    Marketing
    Google AdSenseThis is an ad network. (Privacy Policy)
    Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
    Index ExchangeThis is an ad network. (Privacy Policy)
    SovrnThis is an ad network. (Privacy Policy)
    Facebook AdsThis is an ad network. (Privacy Policy)
    Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
    AppNexusThis is an ad network. (Privacy Policy)
    OpenxThis is an ad network. (Privacy Policy)
    Rubicon ProjectThis is an ad network. (Privacy Policy)
    TripleLiftThis is an ad network. (Privacy Policy)
    Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
    Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
    Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
    Statistics
    Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
    ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
    Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)