Congress passed the Periodic Payment Act of 1982 to help popularize the use of structured settlements as viable methods of receiving financial compensation after an accident. Through this act, all of the payments from structured settlements are tax-free. You do not have to pay any taxes on structured settlements. There are, however, some exceptions where you may have to pay.
Structured settlements can be slow to payout. When you need cash now and can’t afford to wait for your next payment, consider getting structured settlement funding to help ease your economic hardship. Applying for funding with Silver Dollar Financial is quick and easy. Call us today to learn more about how we can help you. You can reach us at (877) 871-0628.
Why Are Structured Settlements Tax-Free?
When you receive financial compensation for your injuries and damages, you are not gaining any income. Compensating for the loss you suffered means you did not increase your wealth or salary. You are simply covering the expenses you incurred due to no fault of your own. Thus, the IRS and state governments do not view compensation as a taxable source.
Think of it this way, the compensation you receive sustains you and keeps you from entering into financial ruins. It would make no sense for the government to tax your settlement and take away the money you need to survive. This would most likely put many personal injury victims on government assistance, which would defeat the purpose of taxing them to begin with since the money would go right back to them.
Click to contact the Silver Dollar Financial Team today or Call +1(844)871-0628
When Are Structured Settlements Taxed?
There are some instances where the tax-free exemption will not apply to structured settlements.
Selling Your Settlement
If your structured settlement was for personal injury-related compensation, then you will not get taxed on the sale unless the terms of the structured settlement change. So long as the terms remain the same and the court approves of the sale, you will not get taxed on the sale of your future payments.
Despite having the word damages in its name, punitive damages do not compensate for anything. The court uses punitive damages as a form of punishment against a particularly negligent or malicious defendant who caused an accident to occur. Mainly, this acts as a deterrent to prevent future accidents of this nature from happening again.
Since punitive damages are not compensatory, the Internal Revenue Service (IRS) states that they are taxable. Even if the punitive damages awarded are part of your settlement, that part will still get taxed.
Recovering lost wages means you are recovering parts of your standard income. Because these lost wages are part of the money you make regularly, you will most likely get taxed by the state and federal government. There are certain exceptions to this rule, but taxes get levied for this type of compensation in most cases.
Do Structured Settlements for Minors Get Taxed?
No, they do not. Being a minor does not interfere with or affect tax laws regarding compensation. No matter who the recipient is, the payments received from a structured settlement will not get taxed unless certain exceptions, like those listed above, are involved.
Will I Get Taxed if I Need Money Now?
If you need money now to help cover expenses and don’t have the ability to wait for slow payments, you can get structured settlement funding to help you out of a tough financial spot. You will not get taxed when you decide to sell your settlement partially or entirely unless the terms of the settlement change. When receiving funding, you pay us back with the settlement payments you receive. There are usually no taxes involved in this process.
Naturally, each situation is different, and we cannot guarantee that everything will be tax-free. It is best to apply online or call us so our financial experts can assess your settlement.
Apply Now for Pre-Settlement Funding
Applying Is Easy
To find out if you qualify for structured settlement funding, apply online by:
- Filling out our application with the necessary information.
- Wait for our team to review your application.
- Get notification of approval in as little as 24 hours.
After approval, you can potentially receive up to $100,000 worth of funding that you can use however you wish. There are no restrictions on where you decide to put your money towards. We work fast to notify you quickly of your approval so you can get started on covering your bills and whatever other expenses you may have.
Let Our Financial Experts Help You
Tax laws are hard to understand. Our team of financial experts can assist you in navigating the rules and regulations surrounding your structured settlement. Financial assistance is only a click away. If you have any questions, please call us at (877) 871-0628. There is no risk or obligation to you when you reach out.