Generally, wrongful death settlements are not taxable in South Carolina. Medical bills, lost wages, and other types of compensatory damages that you get in a wrongful death settlement aren’t classified as taxable by the state or the IRS.
Yet, in your settlement, punitive damages awarded to punish an at-fault party for committing negligent acts are subject to income tax. Consult with a wrongful death lawyer in Columbia if you get a settlement offer from anyone at fault for a family member’s death or their insurance company.
Your attorney knows how emotionally taxing it is to proceed with a wrongful death claim. They will handle your legal matters with care and help you weigh the tax implications of your settlement proposal.
When are Wrongful Death Settlements Taxable in South Carolina?
In most cases, a wrongful death settlement in South Carolina isn’t taxable. For example, you get a wrongful death settlement that includes compensation for the burial and funeral expenses of your late family member and other economic and non-economic damages. Compensatory damages aren’t taxable. Thus, with this settlement, you can keep the entire amount.
Think about punitive damages as you evaluate a South Carolina wrongful death settlement. Sometimes, wrongful death settlements include punitive damages to punish a party that has committed careless or reckless behavior that contributed to someone’s fatal accident. If you receive these damages in your settlement, you will have to pay taxes on them.
Outside of punitive damages, any interest included in your wrongful death settlement will be subject to taxes. Also, if your settlement accounts for medical expenses that you previously deducted, this portion can be taxable. Furthermore, you can be taxed for damages for emotional distress if this is unrelated to a physical injury.
What Will Happen if I Don’t Pay Taxes on My South Carolina Wrongful Death Settlement?
If you don’t pay taxes on your South Carolina wrongful death settlement, meet with a tax professional who can examine your settlement and explain your tax obligations. If you’re not required to pay taxes on your settlement, there’s no reason to worry.
Of course, if there are taxable portions of your wrongful death settlement, you will have to plan accordingly. If you don’t pay your taxes on your settlement, you will face penalties and interest. These can include an IRS failure-to-pay penalty of 0.5% per month. Choosing not to pay your taxes for a long time can lead the IRS to seize your assets.
Before you accept a wrongful death settlement offer, review the proposal with an attorney who has a wealth of relevant case experience. Your lawyer can help you assess the offer and provide insights into all that it entails. If necessary, they can negotiate a settlement for you, ensuring that you receive maximum compensation, regardless of taxes.
Tax Factors to Consider with a Wrongful Death Settlement Offer in South Carolina
It is often beneficial to have a tax professional help you as you decide on a wrongful death settlement in South Carolina. This professional can explain the short- and long-term tax implications of a proposal.
Ultimately, they may encourage you to assess various tax factors relative to this offer, such as:
- The nature of your damages: Compensatory damages are provided to make up for a loss and aren’t taxable. Alternatively, punitive damages are intended to punish and can be taxed.
- State and federal laws: Both state and federal tax laws apply to your wrongful death settlement. In South Carolina, federal laws can apply to the taxability of your settlement award.
- The structure of your settlement: How your settlement is structured impacts your taxes. Your tax professional and a wrongful death attorney will work hard to get you a settlement that provides you with adequate compensation without forcing you to pay a lot in taxes.
Together, you, your attorney, and your tax professional can evaluate the tax ramifications of any wrongful death settlement offer that you receive. If a settlement offer falls short of what you want, decline it. At this time, your lawyer can keep negotiating with a liable party or their insurer or, if warranted, bring your case to trial.
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Ask for Help with Your Wrongful Death Settlement Negotiations
The taxability of your South Carolina wrongful death settlement will determine how much money you receive. Have a wrongful death lawyer and a tax professional assist you with your settlement negotiations. Then, you can get the help you need to minimize the tax implications of your settlement.
When it comes to wrongful death settlement negotiations, it pays to have The Strong Arm™ on your side. John Foy & Associates has over 350 years of combined experience. Trust us to help you negotiate a reasonable wrongful death settlement with little to no tax liability. Contact us for more information.
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