Lung Mesothelioma

Tax Payment in Mesothelioma Settlement

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Mesothelioma Settlement

A number of lawsuit settlements and compensations are considered to be taxable. There have always been debates and discussions on whether the amount obtained by the victim of mesothelioma from his employer is considered to be taxable. In general, business lawsuits are often subjected to taxes. However, the debate continues whether the compensation obtained by the victim of a critical disease such as mesothelioma can be taxable.

Are mesothelioma settlements taxable?

Until now, the tax policies on mesothelioma case were not very clear. Some states used to deduct some amount of taxes as part of mesothelioma lawsuit award and in many cases, some attorneys also charged the victims exuberantly on the compensation amount. It is only recently that the Internal Revenue Service (IRS) in the US has come up with specific clauses as far as mesothelioma settlement is concerned. The IRS has noted that the following settlements such as interest (from the stock market, trading, fellowship grant), punitive damages, emotional distress or mental anguish, and employment discrimination or injury to reputation are considered to be taxable. However, the compensation received from the mesothelioma settlements do not fall under the category.

However only in case of lump-sum amounts, especially when the compensation is huge, some nominal taxes can be imposed that too based on some specific situations. But even then the mesothelioma lawsuit claims are very basic due to their nature of seriousness.

Taxation laws in different states

Although in general mesothelioma settlements are tax-free, it varies slightly from one state to the other. This is because, in the US, each state has the right to make its own tax law as far as the settlement amount is concerned.

In California, the government has made it mandatory for citizens to pay taxes on lawsuit settlement. However, taxes are levied only on the part that is punitive in nature. This means any portion that is compensatory, will not be taxed. The state is so citizen friendly that if settlement compensation is received even for emotional distress, it is not taxable, unlike many other states. Therefore, mesothelioma lawsuit claims are completely free from paying taxes. Pennsylvania also has a similar clause where only compensation on punitive cases is taxable.

In San Diego however, citizens have to pay for the compensation they receive as part of their lawsuit settlement. Even mesothelioma settlement awards are considered as compensatory funds and therefore a nominal tax is imposed. Similarly, in Texas, as the lawsuit settlement award to the Mesothelioma victims are generally paid as a lump-sum amount, a certain amount is levied on the amount.

On the whole, the compensation that is received for the physical injury used for medical treatment and the illness is tax-free. But some states impose a nominal amount for the lost income and interest is taxable. Therefore, it is important to discuss with the lawyer before going for the settlement.

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