When I receive the settlement on my car accident, how do I keep from having to pay taxes on itif I put it in the bank?
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When I receive the settlement on my car accident, how do I keep from having to pay taxes on itif I put it in the bank?
I will soon receive the settlement which is minimum but I don’t want to put in any fund that will cause me to have to pay taxes on it later. Is there an option?
Asked on December 19, 2011 under Accident Law, New Jersey
Answers:
Hong Shen / Roberts Law Group
Answered 12 years ago | Contributor
I do not believe you need to pay tax on the payment. The rule of thumb is since you had a loss and the payment reimburses your loss of the car, there is no income and you do not pay tax. This way, you cannot claim the loss on your tax form either since there is no loss. However, if the payment is larger than your loss and you actually made a profit then you may have to pay tax on it.
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