If you are pursuing a settlement from a car accident claim, you may be wondering if you must pay taxes the compensation you have secured. Perhaps you have already received a lawsuit settlement, and you are wondering why you haven’t had to pay any taxes on it. The answer is that if you receive a settlement from the Insurance Corporation of British Columbia (ICBC), your settlement money is not taxable.
ICBC requires all vehicle owners in B.C. to purchase universal car insurance that protects against third-party car crash claims, hit-and-runs, uninsured vehicle owners, and other accident claims. After an accident, you have 24 hours to report your accident to ICBC. An insurance claims adjuster may contact you with a settlement offer after researching the specifics of your case. However, this initial settlement offer is often not fair and merely benefits ICBC by minimizing financial compensation for your accident.
If you Win a Lawsuit, is it Taxable?
Most lawsuit settlements are not black and white. These settlements require the advice of experienced lawyers. Klein Lawyers have been assisting with lawsuit settlements in personal injury cases for over 20 years. We can help you seek the compensation you deserve and assist with any questions you have regarding your ICBC settlement.
According to the Canadian Government Revenue Agency, compensation received from a province or territory if you were a victim of a motor vehicle accident is exempt from being taxed. Before the distribution of your settlement, ICBC calculates any lost wages from the accident, and they deduct the amount of taxes you would have paid if you had received that income from the settlement before you receive it.
Filing an accident claim with ICBC can be intimidating simply because of the nature of the company. Because ICBC is an insurance company employing insurance adjusters, their ultimate goal is to minimise settlement payouts. The insurance adjusters do not have your best interests in mind. It is essential to hire a lawyer to protect your rights after a car accident in British Columbia.
Our lawyers have extensive experience with ICBC claims and we know how to navigate the steps you can take to maximize the amount of your financial compensation. If you are about to receive a settlement and are unsure about required taxes, seek the help of an experienced lawyer today. Although most cases do not require taxes to be paid on the settlement amount, there are some instances where taxes on settlement money can get complicated. Klein Lawyers can help you in determining if your settlement is subject to any taxes.
Paying Taxes on Lawsuit Settlements: When Not to Pay
If you have received settlement money and you have not been required to pay taxes, you may be wondering why. The exact value of an ICBC lawsuit settlement is determined on a case-by-case basis. Insurance claims adjusters consider lost wages, the duration of your injury, the severity of the injury, property damage, as well as the damages for pain and suffering caused by accident. However, the final sum of your lawsuit settlement is not taxed due to the following reasons:
- ICBC adjusts the amount of your settlement based on your lost wages. ICBC determines the amount of lost wages that are attributable to the car accident and deducts the amount of taxes you would have paid if you had received your proper income from the overall sum of the settlement before distribution. They determine this by using your appropriate tax bracket.
- According to the Income Tax Act of 1985, pain and suffering damages are not taxable. For example, compensation for emotional distress caused by a car accident is tax-free.
- If you received a settlement or are going to be receiving ICBC Part 7 disability benefits, these benefits are also exempt from taxes. If you or someone you know becomes disabled due to a car accident, ICBC Part 7 benefits will not be taxed.
Do you Have to Pay Taxes on Insurance Settlements in Vancouver?
If you are in the Vancouver area and you are receiving an ICBC settlement funds due to a car accident resulting in lost wages and pain and suffering, you should not have to pay taxes on the settlement you have received. This also includes ICBC Part 7 disability benefits.
Although it may feel unusual not to owe taxes after receiving a large settlement, this is entirely normal when receiving a settlement from ICBC. The government normally taxes your income, so why aren’t they taxing you now, after receiving a large settlement? The answer is that they already have. ICBC has already adjusted your settlement as if you would have been paying taxes for your potential lost wages. You do not have to worry about lawsuit settlement taxes because the government has already deducted taxes from your lost earnings before you receive the settlement.
Taxes on Lawsuit Settlements: Get Help Now
The team at Klein Lawyers, LLP, has extensive experience helping car accident victims and their families with filing ICBC claims in Vancouver for more than 20 years. Our experienced lawyers can provide you a free consultation to discuss how we can help you and your family.
Serving Vancouver and surrounding areas of British Columbia, our lawyers understand how complicated it can be to get the proper compensation for the damages you have suffered in an accident. We are prepared to fight for you to seek the compensation you deserve.
Contact us now to discuss your situation. Our initial consultations are always free, and we charge no fees unless we obtain compensation for you.