The South Carolina personal injury system is designed to help injured victims get compensated for damages like medical bills, pain and suffering, lost wages, property damage, and others following an accident that was not their fault. With decades of combined experience handling injury insurance claims across the state, our South Carolina injury attorneys are frequently asked whether or not personal injury settlements are taxable. Below, we have summarized some of the more common general questions and answers about the taxability of recoveries in personal injury cases; however, for a definitive answer in your particular case you should consult with a tax lawyer or accountant.

In South Carolina, most personal injury settlements are tax-free. However, there are some exceptions to this rule which we discuss in further details throughout this article. Rest assured that even though certain parts of your personal injury claim may be taxed, it is almost always worth pursuing a personal injury case after any accident that leaves you physically injured because monetary recovery for physical injury is almost never taxable. 

What Parts of My SC Personal Injury Settlement Are Taxable?

Non-economic damages awarded in your personal injury settlement or verdict can be taxable depending on the circumstances. Non-economic damages that may be subject to taxation includes compensation for damages such as lost wages (which you would have paid taxes on anyway), interest on sums due, and categories of damage such as loss of enjoyment of life and mental distress.

However, in some instances, if the particular damage is directly related to physical injury, even these types of compensation may be exempt from taxes. For example, mental and emotional damages may be excluded from federal taxable income if they result from a physical injury.  

In addition, in some personal injury cases, you may be awarded punitive damages. Punitive damages are taxable under state and federal law. These damages are intended to punish the defendant for their actions to deter others from acting the same way in the future.  

Have a question? Your lawyer can help you understand how these taxes pertain to you based on the specifics of your case and how to potentially optimize your settlement for tax purposes.

What Parts of My SC Personal Injury Settlement Are Not Taxable?

United States Tax Codes prevent taxes on personal physical injuries. Typically, this also prevents compensatory damages or “actual damages” from being taxed. Actual damages include:

  • Medical Bills
  • Rehabilitation Costs
  • Prescription Medication Costs
  • Future Care Costs, and more.

Is It Worth Hiring a Lawyer and Starting a Claim If It Will Be Taxed?

Yes, it is still worth pursuing a personal injury claim even if your settlement/verdict may be taxed. If you’ve been injured due to someone else’s negligence, no matter the case type, it is still worth pursuing a personal injury claim alongside a reputable attorney because it is likely that most of your recovery will not be taxable.

Not only do personal injury claims help recover the compensation you deserve for the damages you’ve been forced to go through, but they also hold liable parties accountable to help prevent dangerous accidents from happening in the future.

Contact a Reputable Personal Injury Lawyer Today

Whether you have started the personal injury claims process or are still deciding if you should file a claim, the personal injury lawyers at Cavanaugh & Thickens, LLC are here to help answer any questions you may have and guide you through the process. For a free case evaluation, simply call our office at (803) 888-2200 or submit our secure online form and a member of our team will be in touch shortly. 

For your convenience, Cavanaugh & Thickens, LLC has offices in Columbia and Charleston, represent cases throughout the state, and travel as needed. Our personal injury lawyers have decades of experience handling injury cases across the state of South Carolina, with hundreds of 5-Star reviews across the web. 

Our team represents a wide variety of personal injury case types in Columbia and throughout the state, including but not limited to:

Disclaimer: This article is presented for informational purposes only and is not legal advice. The attorneys at Cavanaugh & Thickens, LLC are not tax attorneys and do not offer any tax advice. We always recommend consulting with a tax attorney or accountant to determine if any compensation received is taxable.