Are Punitive Damages Taxable? Here’s What the IRS Says

Описание: In this video, settlement planning attorney and Certified Financial Planner Greg Maxwell breaks down the tax implications of punitive damages in legal settlements and how the Plaintiff Recovery Trust can be a powerful tool to minimize taxes and maximize net recovery, ensuring that plaintiffs keep more of their settlement money.

Get an estimate of your legal settlement tax bill with our free Settlement Tax Calculator: settlementtaxcalculator.com.

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If you have any questions about this video, please call Greg Maxwell at (801) 683-5998, email Greg at [email protected], or book a free 15-minute phone call with Greg at https://go.oncehub.com/Amicus-15Minutes.

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Chapters:
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0:00 - Intro
0:25 - Overview
0:36 - Legal Disclaimer
0:51 - What are Punitive Damages?
1:06 - Difference of Punitive Damages with Compensatory Damages
1:24 - When are Punitive Damages Awarded?
1:41 - The Taxability of Legal Settlement
2:07 - How Does the IRS Treat Punitive Damages
2:54 - Punitive and Compensatory Damages Tax Treatment
4:05 - The Tax Cut and Jobs Act
4:44 - Visual Representation of Settlement Taxes
5:00 - Tax Treatment of Post-Judgment Interest
5:07 - Summary of Punitive Damages Tax Treatment
5:47 - What Can You Do to Reduce Taxes?
6:00 - The Plaintiff Recovery Trust
6:37 - Comparison of Settlement Taxes With and Without the Plaintiff Recovery Trust
7:37 - Overall Summary
8:24 - Book Your Free 15-Minute Call
8:54 - SettlementTaxCalculator.com

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Email: [email protected]
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Video Summary:
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In this video, attorney and Certified Financial Planner Greg Maxwell addresses the question of whether punitive damages from a legal settlement are taxable. Greg explains that punitive damages, designed to punish the defendant rather than compensate the plaintiff, are fully taxable as ordinary income according to the IRS. With the introduction of the Tax Cuts and Jobs Act in 2017, legal fees attributable to punitive damages are no longer deductible, potentially resulting in a significant tax bill for plaintiffs. It is important to have tax planning tools in place, such as the Plaintiff Recovery Trust which allows plaintiffs to only pay taxes on the amount they actually receive, and not the entire punitive damage amount.

Planning for tax savings must occur before the settlement is finalized. We offer free consultations and personalized tax savings analyses to help individuals determine how much they can save using these strategies. We also have a proprietary settlement tax calculator available at SettlementTaxCalculator.com to estimate potential tax savings.