Are Personal Injury Settlements Taxable in Massachusetts?
Hey everybody, Anthony Riccio over here, Founding Attorney of Riccio Law, a Massachusetts Personal Injury and Criminal Defense Law Firm with offices in Quincy and Attleboro, Massachusetts. I wanted to spend a couple of minutes addressing a question that I regularly get from clients that I’m representing on personal injury claims. And that question is whether or not the proceeds of a personal injury settlement in Massachusetts are taxable. While there are some exceptions, the general answer is that no, the proceeds of a personal injury settlement in Massachusetts are not taxable.
As I just mentioned, there are some exceptions like there are in most areas of the law. A few of the exceptions are awards for lost income, emotional distress, and punitive damages. So if you have a personal injury case and as part of a settlement, there is a designation for loss wages, essentially reimbursement for missed income due to missing some work from your injuries. If there is a designation or a portion of the settlement designated for loss wages, that particular designation or that amount for the lost wages could be taxable in Massachusetts.
Also, emotional distress, if there is a portion of the settlement that is designated for emotional distress, that particular amount for that designation could be taxable in Massachusetts. And another designation that would likely result in a taxable event in Massachusetts is any proceeds for punitive damages. And basically, that is punishment or money awarded as a punishment toward the liable party, the wrongdoer.
So if your personal injury settlement or verdict includes portions or designations for loss wages, emotional distress, or punitive damages, those particular designations and dollar amounts could be taxable. But as a general rule of thumb, a lump sum settlement, whether prior to filing a lawsuit or after the filing of a lawsuit, likely would not be a taxable event. The settlement would often include some language basically stating that the insurance company, the wrongdoer, is not acknowledging liability but is making payment to resolve the claim.
In those situations, generally speaking, there are not designations for loss wages, emotional distress, or punitive damages. And then, so long as there’s not and it’s just a general settlement as a personal injury claim, the proceeds from that settlement would not be taxable. If you have any questions or are interested in pursuing a personal injury claim in Massachusetts, feel free to reach out to me, Anthony Riccio, Founding Attorney of Riccio Law.