Is Your New Jersey Personal Injury Settlement Taxable?

February 13, 2019 | By admin

is my settlement taxable in new jersey?You’d be surprised by the types of financial sources that are taxed by the government. There are a lot more things to worry about than just your paycheck or when you buy goods at a store. Other surprising sources that are taxes include, alimony payments, massive financial gifts, scholarship, bartered items for work, and even lottery winnings. Luckily, things are different when it comes to personal injury cases for the most part.

Physical Injury Lawsuit Winnings are Generally Not Taxable

As a general rule, compensation gained from a personal injury lawsuit cannot be taxed by the government in New Jersey. Personal physical injuries also include physical illnesses. In fact, this rule applies regardless of the state the lawsuit occurs and is even applied to federal level lawsuits. This rule still applies even if you settle the issue before taking the issue to court. AS a final note, it is not considered something that has to be added into a taxpayer’s gross income either during tax season.

Exceptions to the No Tax Rule Applied to Physical Injury Compensation

Unfortunately, not every single physical injury case is completely untaxed. There are exceptions to the general rule. For instance, if the basis for your case involves a breach of contract, then you will be taxes on the damages. Another involves a punitive damages claim, which is always taxable. In such cases, attorneys usually request for both a verdict with compensatory damages and punitive damages. This is to make sure that the government receives their taxed portion and the victim gets necessary compensation for medical bills and other costs associated with the personal injury.

Physical Versus Emotional Injuries

It is important to understand that the government is very specific about the type of injury claims that are nontaxable. When they say physical injuries are nontaxable, they mean that exactly. It has to be something that you can prove has caused you physical pain or suffering. If you are suing on the basis of an emotional injury such as PTSD, severe stress, depression, etc., your compensation will be taxed. If you are able to prove that the mental ailment is causing a lot physical problems, however, you may be able to get around this.

Taxes on Interest on Judgement

A final exception to the nontaxable rule on physical injury lawsuits has to do with interest on judgement. Like many states, New Jersey actually has interest added to personal physical injury verdict. If you were to file on January 1, 2018 and win your physical injury lawsuit, you would receive interest on the verdict starting on that file date. If for some reason your lawsuit was dragged out, you would get bonus interest on your compensation. This interest, however, is taxable by the state government. Be aware of all these exceptions in order to avoid surprise taxes and receive an optimal settlement.

Contact an Old Bridge Personal Injury Lawyer to Discuss Your Case in New Jersey

Did you or a loved one sustain serious personal injuries in New Jersey? Don’t let the medical bills pile up while you wait for the negligent party or their insurance company to do the right thing. Right now, you need an aggressive personal injury lawyer on your side, fighting to get you the compensation you need, want, and deserve. The skilled attorneys at Lombardi & Lombardi represent clients injured in Piscataway, Jackson, Howell, New Brunswick, and throughout New Jersey. Call (732) 906-1500 or email us to schedule a free consultation about your case. We have an office conveniently located at 1862 Oak Tree Road, Edison, NJ 08820, as well as offices in Brick, Freehold, and Point Pleasant Beach.

The articles on this blog are for informative purposes only and are no substitute for legal advice or an attorney-client relationship. If you are seeking legal advice, please contact our law firm directly.


1862 Oak Tree Road
Edison, NJ 08820

T. (732) 906-1500


10 Parsonage Rd.
Edison, NJ 08837

T. (732) 205-0580


119 Chambers Bridge Rd.
Brick, NJ 08723

T. (848) 232-2831


402 West Main Street
Freehold, NJ 07728

T. (732 )780-0569

Point Pleasant

62 Broadway
Point Pleasant Beach, NJ 08742

T. (732 )734-4490

Our Awards Our Awards Our Awards Our Awards
Lombardi and Lombardi, P.A., serves clients in Newark, Elizabeth, Edison, Woodbridge, Toms River, Brick, Middletown, Union City, Piscataway, New Brunswick, Perth Amboy, East Brunswick, Plainfield, Jackson, Sayreville, Linden, South Brunswick, Marlboro, Freehold, Manalapan, Westfield, Rahway, Carteret, Somerset, Old Bridge, South Plainfield, Cranford, Avenel, Iselin, Clark, Red Bank, Point Pleasant, Middlesex County, Essex County, Ocean County, Monmouth County, Union County, Somerset County and throughout New Jersey.

© 2017 Lombardi and Lombardi, P.A. All Rights Reserved. Site Map. Privacy Policy.