What To Know About Settlement Deductions
When it's time for you and your personal injury lawyer to discuss your damages, it's important to know what you are owed. It's also important to consider the deductions that could come out of a settlement check. Read on and learn more.
Settlements and Judgments
When you agree to a settlement, you are given a check for your damages in return for promising not to pursue the accident claim in court. If you do take your case to court and win, what you are paid is known as a judgment. Both forms of payment could contain certain deductions, and accident victims should take the deductions into consideration before they agree on how much to ask the at-fault driver's insurer to pay them.
Legal Fees
Almost all personal injury lawyers work on a contingency fee payment plan. They only get paid when you do. If you don't win your case, you owe the lawyer nothing, no matter how hard they worked on your case. The contingency fee plan allows a certain percentage to be removed from your winning check before you claim it. The percentage varies from lawyer to lawyer and from location to location. If your lawyer works on a 40% contingency fee plan, your settlement is reduced by 40% to pay your legal fees. The more the lawyer attains for you, the more both of you receive. This is common and a fair way to pay your legal fees. However, know that your legal fees will be deducted from any settlement or court judgment.
Punitive Damages
Only cases that go to court will merit punitive damages. This extra form of compensation is decided upon by the judge and/or the jury that heard your vehicle accident case. However, not all accident situations will call for the addition of punitive damages. For example, it might be appropriate to award punitive damage when a driver was drunk, filming themselves on Facebook, and driving aggressively while doing so. They are often used when the defendant is a large company as well.
Punitive damages are different in that they can be taxable in many areas. Be sure to speak to a financial expert about any punitive damages you were awarded. On the other hand, ordinary money damages are not usually taxed, but there are some exceptions.
When Taxes Are Owed
Lost wage reimbursement is a common form of personal injury compensation. However, it might also be considered income. You would have been taxed on the wages if you had been able to work. That means you are likely liable for taxes on your lost wages. Check with a tax expert to find out more.
Your settlement can be affected by deductions, and it pays to discuss this matter with your lawyer right away. Contact a personal injury lawyer to learn more.