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Are Car Accident Insurance Settlements Taxable?

Are Car Accident Insurance Settlements Taxable? | Free Consults

The Internal Revenue Service (IRS) affirms that a whole car accident insurance settlement isn’t taxable in Nevada. However, particular damages can be taxed, such as medical bills, lost wages, future lost earning capacity, and punitive damages.

This article will detail the forms of compensation that will be, might be, and will not be taxed.

Forms of Taxable Compensation after a Car Accident Case Settles

If the court cannot link your damages to your injuries, they will be taxed. See the list below to see how the taxes pertain to each loss.

Lost Wages and Future Lost Earning Capacity

Because your injuries kept you from working part-time (or altogether), you probably claimed damages for your:

  • Salary
  • Hourly wages
  • Promotion
  • Lost business opportunity
  • Vacation time
  • Employee benefits
  • The difference between your old and new wages

The IRS will still tax you on these losses because they do not account for the direct cost of your injuries.

Punitive Damages

These damages have more to do with the liable party than with you, as they are used to punish the defendant for harming you. Punitive damages are awarded because the defendant’s actions were either intentional or grossly negligent.

For a free legal consultation, call (855) 605-2959

Past and Future Medical Bills Are Usually Not Taxable

Medical bills are directly attributable to your injuries so they are not taxable.

However, the IRS says that “you must include in income that portion of the settlement that is for medical expenses you deducted in any prior year(s) to the extent the deduction(s) provided a tax benefit.”

Your lawyer or accountant can explain what this means for your case.

Past and future medical bills you can claim in your case include:

  • Medications
  • Diagnostic assessments (e.g., bloodwork and x-rays)
  • Assistive devices (e.g., crutches)
  • Doctor’s appointments
  • Hospital stays
  • The ambulance ride
  • Surgeries

Types of Damages That Are Not Taxable

You don’t have to worry about the following damages being taxed, as they stem directly from your accident.

  • Past and future pain and suffering: Your injuries are causing you pain and keeping you from living life as you used to.
  • Past and future mental anguish: The accident has probably caused you some mental health problems, such as anxiety, post-traumatic stress disorder (PTSD), insomnia, and depression.
  • Property damage: You might need to repair or replace your vehicle. This is not taxable in some situations.

If you lost your loved one in an accident, some of those consequential losses—such as their medical bills and your own pain and suffering—might not be taxed, either.

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How a Car Accident Lawyer at Our Firm Can Help You Build a Strong Case

Your lawyer can provide more information about what can and can’t be taxed in your settlement amount. They can also provide other services throughout the course of your case, such as:

  • Collecting evidence (e.g., photos and videos of the accident and your injuries
  • Identifying who is liable
  • Dealing with insurance companies
  • Managing communication with all relevant parties
  • Advocating for you in a trial
  • Informing you of the status of your case

Should the insurance company refuse to give you a settlement amount you requested, NRS §11.190(4)(e) permits claimants to file a personal injury or wrongful death lawsuit within two years of the accident or day or death. There are a few rare exceptions to the two-year deadline, so make sure you check with your lawyer to determine which one corresponds with your case. You risk your right to recover any damages if you try to file past the deadline.

Complete a Free Case Review form now

Your Attorney Can Work for You on a Contingency-Fee Basis

Are you worried about not being able to hire our firm? Don’t be. We do not want to add to your financial hardship, so we will take your case for a contingency fee. In other words, we will not charge you anything up front or hourly for retaining our services. This allows us to get to work on your case right away and eases some of your worries about finances.

Instead, once you receive compensation, we will take our payment. We will agree on how much our lawyers will take before we get started, so you won’t be left in the dark. Also, your lawyer can make sure you are “in the loop” with everything pertaining to your case, including knowing about possible taxes on your car accident insurance settlement.

How We Have Helped Others with Cases Similar to Yours

Our more than 60 years of experience have helped us secure hundreds of millions of dollars for our clients. Some instances include:

  • $9,000,0000 for a neck injury from a car accident
  • $1,425,000 for a foot and ankle injury from a car accident
  • $450,000 for a neck injury from a drunk driving accident

Now, we want to help you get the compensation you are entitled to receive. Reach out to High Stakes Injury Law today for a free consultation with a team member.

Call or text (855) 605-2959 or complete a Free Case Review form

Get A 100% Free Case Evaluation From A Top-Rated Personal Injury Attorney Call: (702) 707-5934 or Contact Us Online


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“After being in an accident my friend told me to call High Stakes Injury Law. A lawyer named Brian came to my home to meet with me and started my claim immediately. The legal team was extremely efficient, responded back to me quickly, listened to my concerns, and handled everything with speed and accuracy. Every step of the way was communicated. I received my settlement in 10 months’ time. I highly recommend using Berstein and Poisson. Thank you for helping get my life back on track.”


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I Was Injured In An Accident. What Do I Do Now?

By Scott L. Poisson

  • Do I Have A Case?
  • Dealing With The Insurance Company
  • When a Lawsuit Is Filed
  • Overcoming Common Defense Themes
  • Special Considerations in Specific Types of Cases