Car accidents are one of the leading causes of personal injury claims in the state of Alabama. Statistics show that in 2016, a motor vehicle accident caused an injury about every 12 minutes. This accident rate in Alabama was higher than the national statistics.
Whenever you or someone you know suffers a personal injury, it is important to know what steps to take to ensure that your case is handled properly. Contacting a personal injury lawyer is a good first step. A personal injury lawyer is going to be able to walk you through the timeline of events, what to expect during the process, how to handle claims and settlements, and prepare you for what to realistically expect given the circumstances of your case.
The other important reason to contact a lawyer is that personal injury laws, or other laws that affect these cases, sometimes change. Staying up to date with those changes can have a huge impact on the settlement and claims experience.
A Change to the Tax Law
Accident cases often lead to some sort of monetary settlement, and for clients in these cases the money can be tax-free. When the client has suffered some sort of physical injury or sickness, the compensatory damages awarded should be tax-free money. This is a significant part of the law because some of these settlements can involve large sums of money. Punitive damages, on the other hand, are taxable. For your settlement money to be tax-free, the injuries must physical. Emotional distress, or even physical responses from that stress such as insomnia or headaches, are considered normal byproducts of emotional distress. This means money from any emotional distress claims is taxable.
In most cases when you are injured, you will seek a lawyer who operates on a contingent fee basis. This means they will not get paid until a settlement is reached. A percentage of that settlement money then goes to the lawyer as their fee. This arrangement is where the Trump Era tax plan has changed the process a bit. If your claim is one that is fully taxable, then the new tax law will have a major impact. Let’s say that you are involved in a case where someone has caused you emotional distress. You win the case and a settlement of $50,000 is awarded. Your lawyer’s fee is $20,000 and you would then have a net gain of $30,000. It would make sense that you would be taxed on just the $30,000, which is what the law said just a few years ago. Under the new system, you would be taxed on the entire $50,000, even though you are only keeping 60% of the money.
In the past, you would have been able to itemize the $20,000 lawyer’s fee and claim it as a miscellaneous expense. As of 2018, that is no longer the case. Now the entire $50,000 must be reported and you will be taxed on the entire amount. This will have a negative effect on the actual amount of money you will receive from the settlement.
Choose the Experts at Hadley Law Firm
Going through an experience that leads to a personal injury is traumatic and can have lasting effects on you. Rather than slogging through the details of personal injury law, the best bet is to hire a competent, experienced and successful personal injury lawyer at Hadley Law Firm. Lawyers in this field will have the latest information on how personal injury laws are changing, and the depth of knowledge required to help you through this difficult situation.