It’s common for injury victims to hesitate before reaching out to a Toronto personal injury lawyer after being seriously injured in an accident. One reason is because of the fear of tax consequences if they were to be awarded compensation through a personal injury settlement in Ontario.
Tax laws can be quite complex, so it is only natural to wonder what kind of impact an injury settlement could have on you financially when it comes time to file your taxes.
But just because you may be taxed on your injury settlement, doesn’t mean you shouldn’t seek justice for what’s happened to you. Continue reading to learn more about how taxes work when it comes to personal injury settlements in Ontario and why filing a lawsuit may still be in your best interests.
Non-pecuniary damages are more commonly known as pain and suffering and can also include other losses that do not have a monetary value. Such damages might include diminished quality of life, emotional distress, and loss of companionship and love, to name a few.
The good news is that non-pecuniary damages won’t be taxed when you are awarded an Ontario personal injury settlement.
However, it is important to note that non-pecuniary damages have a cap of $100,000 established in 1978 by the Trilogy Supreme Court. This amount has since been adjusted for inflation and now caps these damages at $350,000 for non-intentional torts. This is quite different from the U.S., in which victims of accidents can be awarded millions for non-monetary losses.
Any compensation you are awarded when you file a personal injury lawsuit that is directly related to your lost wages will be subject to taxes. Just as you would pay taxes out of your paycheck each week, however much you are being compensated for your loss of income will also be considered taxable.
You may not be taxed on any other damages you are awarded, but it is important to prepare accordingly when you are awarded compensation for lost wages. One way injury victims avoid paying taxes on any portion of their award is to receive a structured annuity. This means that your award will be dispersed in smaller amounts over a period of time.
It is important to note that although structured settlements are not taxable, any gains you make when investing your injury settlement are still subject to federal and provincial taxes.
Despite the fact that a portion of your personal injury settlement may still be taxable, filing a lawsuit can help you obtain the compensation you need to rebuild your life after an accident. The vast majority of your settlement is not taxable, and, in filing a lawsuit, you will have also done your part to ensure that the liable party is brought to justice for their wrongdoing.
Don’t let the fear of paying taxes hold you back from the compensation you need to rebuild your life. Schedule a free consultation with a reputable Toronto personal injury lawyer at Jasmine Daya & Co. to get started on your case. You can visit our website or give our office a call at 416-967-9100 to set yours up at your earliest convenience.
