Are Personal Injury Settlements Taxable in Maryland?

Are personal injury settlements taxable in Maryland?

One of the best parts of being a personal injury attorney is handing my clients their settlement check.  Many times my clients ask me if their personal injury recovery is taxable?  Is Uncle Sam and/or the State of Maryland going to take their share?

As always, I like to refer to the Maryland Civil Pattern Jury Instructions to educate my clients and future clients.

Personal Injury Settlements Taxable – Legal Explanation

“Any compensatory damages awarded to the plaintiff are not income within the meaning of Federal and Maryland income tax laws and the plaintiff will not owe or have to pay any income tax on the amount awarded as damages. Therefore you should not add an amount to any award to compensate for anticipated taxes.” (Maryland Civil Pattern Jury Instructions)

Personal Injury Settlements Taxable – Attorney Explanation

No, your personal injury recovery is not taxable!  I think public policy supports this law because its unfair to take money from someone who has been injured by another person’s negligence.  Also, a personal injury recovery is for the compensation of the injured victim.  The federal and state governments shouldn’t be making money off other people’s pain, suffering and inconvenience.

I think most, if not all people, agree that the government shouldn’t tax personal injury recoveries.  However, you know who doesn’t believe that: State Farm.

State Farm’s defense attorneys have been taught by State Farm to draw a lot of attention to this jury instruction because it reminds the jury just how much money the “greedy plaintiff” and “ambulance chasing plaintiff’s attorney” are going to get.  It’s typical insurance company deception: draw attention to the plaintiff and keep it off the rule breaking defendant.

Folks, this jury instruction is read to the jury so that they don’t award a plaintiff more money to compensate for taxes.  But, State Farm flips the law upside down and argues to the jury that they shouldn’t aware as much money because a personal injury recovery isn’t taxable.

It’s wrong, and I object every time.

So, your personal injury recovery is not taxable.  But, be aware of the deception of State Farm.

Schedule a Free Auto Accident Attorney Consultation

Albers & Associates is located in Westminster, Maryland.  Carroll County Personal Injury Attorney Ross W. Albers is a former Maryland adjuster that knows what you’re up against.  If you have been injured in an automobile accident, then contact Albers & Associates to schedule a free car injury consultation.