Are Wrongful Death Cases Subject to Income Taxes?
The short answer is no! But we've heard it since our youth, "the only that is certain in life is death and taxes." But in some cases, that old saying does not always hold true.
"Taxes are compulsory payments charged to all persons and enforced by the sovereign state, local and federal governments. Purportedly, taxes pay for government services and administration. Taxes may be levied on any entity or person when they purchase goods, services, or other items such as earned income and so forth. So taxes can be levied on consumers in a wide range of transactions. (See also)."
Many injured victims in California have suffered the calamity of losing loved ones. So this could be a grandfather, child, husband, or wife, due to the negligence of another. Their providing wage earner has gone to the grave. Now they either get an attorney and sue or go broke.
Often, money awards are in the hundreds of thousands or even millions of dollars range. In any case, amounts will come due. These include money for the dead person's hospital and nursing home expenses.
But are wrongful death award amounts subject to tax, and if not, why not? What about punitive damages?
This article explores the tax consequences of a winning death case in the Golden State.
Table of Contents:
- Caveat – Always Speak to a Tax Attorney Before Committing to a Settlement
- What Does the Tax Code Say?
- Descriptive Language
Caveat - Always Speak to a Tax Attorney Before Settling.
At the outset, we do not say we are tax attorneys. We merely cite the IRS code and dissect what it says. Other parts of the judgment, such as punitive damages, have tax consequences. So it remains important to consult an experienced attorney.
But a tax preparer should also get contacted. That also helps settle and structure estate matters.
California law clearly says personal physical injuries stay excluded from taxable income. Federal law proves in accord. But the caveat remains punitive awards. Internal Revenue Code Section 104(a)(2) says punitive damages remain taxable.
However, those costs may get excluded under a state's statutes for wrongful death. (§ 104(c)). But this only applies if the damages occurred on or before September 13, 1995.
The Conference Committee is cited by the CCH Federal Tax Service to report to P.L, 104-188 (1996) H.R. Rep. No. 104-737. This concluded that non-punitive damages for wrongful death would stay excluded as income. (See also Section 104 of the Internal Revenue Code).
The Wrongful Death Tax Statutes And Codes.
The descriptive language under Letter Ruling 200029020 and § 104(c) support this decision. (Revenue Rulings 69-8, 54-19, 75-127, 75-126, 83-44). Damage amounts awarded under a wrongful death statute may get excluded from the taxable estate.
However, general amounts for the dead person are a little bit different. But medical expense refunds may be taxable. So the estate in a survival action is taxed in that case.
Our advice? Get a tax attorney!
As you can see, there a distinction exists between the survivors and the estate. Hence, when it comes to the decedent's pain and suffering, you would likely stay on the hook with the FTB.
Your pain and suffering or medical bills get excluded as taxable. But the decedent's refunds and their pain and suffering seem taxable.
IRS Circular 230 Disclosure: As under U.S. Laws, readers and viewers of this material, please be advised that written tax advice, perceived or otherwise, is not "advice." (and reliance on this article is not authorized).
In conclusion, this article discussed the tax consequences of a winning wrongful death lawsuit. We found that punitive awards can create a taxable event.
Also, we discovered that survivor's cases might be taxable. But regular damages would remain excluded from income. But again, state and federal rules differ. So consult a tax specialist.
Last, no taxpayer may rely on this article to avoid penalties. But if you wish to learn more about death claims law, contact Michael Ehline. He is a negligent death attorney in Los Angeles.
Other Sources: https://www.taxtrimmers.com/taxfaq/death.shtml
Need a civil injury lawyer closer to you? Reach out to a:Bus Accident lawyer in Newport Beach, CA, Redondo Beach Bicycle Pathway Accident Lawyers, Marina del Rey, CA accident lawyers near you.
Practice Area Information
- 15 Passenger Van Accident Attorney
- Admiralty Maritime Law
- Agriculture - Combine Harvesters
- Aircraft - Helicopter Accident
- Amtrak Injury Attorney
- Armored Vehicles
- Baby Sling Recall Lawsuit Information
- Bad Weather Motorcycle Accidents
- Bicycle Defects
- Bicycle Helmet Laws
- Bicycle Laws
- Big Rig Docking Bay Accidents
- Big Rig Truck Accident
- Black Box Truck Accident Lawsuits
- Boat Accident
- Brain Injury
- Broken Ankle Attorney
- Broken Pelvis Attorney
- Building Fire Injury
- California Bite Defenses
- California Policy to Protect the Elderly and Dependents
- Car Accident - Negligent Entrustment
- Carbon Monoxide Poisoning at Work
- Catastrophic Injury
- Chemical Burns & Explosions
- Child Dog Bite Law
- Cold Tire Motorcycle Accidents
- Common Causes of Motorcycle Wrecks
- Construction Accident
- Cruise Ship Accident Resources and Help
- Cruise Ship Rape Attorney
- Cruise Tour Shore Excursions
- Defective Brakes
- Defective Seat-Backs
- Deglove Injury Attorney
- Dimished Value Property Claims
- Distracted Eating and Driving
- Dog Bite Limb and Nerve Damage
- Dog Bites
- Dust Fires & Explosions
- Elder Abuse Defenses
- Elderly & Nursing Home Wrongful Death
- Elders Have Rights
- Electrical Death and Injury
- Employment Law Claims
- Eye Injuries
- Facet Joint Syndrome
- Flammable Fabric Act
- Flammable Liquid Burns
- Food Service Burns
- Fume Ignition Burns
- Gas Explosions
- Gas Tank Explosion
- Government Claims - Pothole Accidents
- Hazardous Materials
- Herpes Tort Attorney in California
- Hot Water Heater Injuries
- Inadequate Security
- Industry - Forklift Accidents
- Industry - Wood Chippers/Shredders
- L.A. and U.S. Traffic Accident Statistics
- Left Hand Turn Accidents
- Limousine Accidents
- Los Angeles Car Accident Victim Resources
- Machine Accidents
- Manslaughter By Dog
- Military Bus Accident Attorney
- Motor Vehicle Ejections
- Motorcycle Accident
- Motorcycle Accident Government Claims
- Motorcycle Accident Resources
- Motorcycle Fracture Injury
- Motorcycle Hit And Run Accidents in L.A.
- Motorcycle Left Hand Turn Accidents
- Motorcycle Passenger Injury
- Motorcycle Wrongful Death
- Open Car Door Injuries
- Parking Structure Incident Attorney
- Playground Accident
- Police Shootings
- Premises Liability
- Preventing, Fighting Off and Responding to Dog Attacks
- Product Defect & Recall
- Relevant Los Angeles, California Dog Laws
- Rental Car Reimbursment
- Ridesharing - Lyft Accidents
- Smoke & Heat Inhalation
- Snapchat Distracted Driving
- Soft Tissue Cases
- Spine Compression
- SUV Rollover
- Talcum Powder Personal Injury
- Tanker Truck
- Testimonials of Wounded Riders