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Are New York Wrongful Death Settlements Taxable?

When a wrongful death occurs, it is important that the decedent’s family members are able to recover compensation for losses incurred as a result of the death.

If you have endured such a painful situation, you may ask questions about whether a wrongful death settlement is considered taxable income.

The answer is no, wrongful death settlements are untaxable, according to the Internal Revenue Service (IRS) in IRS Rule 1.104-1. This is because the IRS considers wrongful death settlements as part of a claim resulting from personal injuries or physical sickness.

A New York Wrongful Death Settlement Is Untaxable, But There May Be Other Tax Implications Associated With the Death

While a wrongful death settlement itself is not taxable, there may still be taxes to pay on behalf of the decedent.

According to The New York State Senate, if the decedent would have owed any federal, state, and local personal income taxes, this money will still be owed after the decedent’s passing (§5-4.3(c)(i)).

In addition, §5-4.3(c)(ii) states that “In any such action tried by a jury, the court shall instruct the

jury to consider the amount of federal, state and local personal income taxes which the jury finds, with reasonable certainty, that the decedent would have been obligated by law to pay in determining the sum that would otherwise be available for the support of persons for whom the

action is brought.”

Essentially, if the case goes to a jury trial, the court must ask the jury to consider any taxes owed by the decent when making a decision about how much compensation to award the surviving victims of the wrongful death.

Last, if the case goes to trial without a jury, the court must also consider any taxes the decent owed when determining how much compensation to award the surviving family members (§5-4.3(c)(iii)).

We’re Here to Help

If your loved one suffered a wrongful death as a result of another’s carelessness, we’re here to help you build the best possible case so that your family receives justice for the loss.

Call The Odierno Law Firm today at (631) 250-4212 to speak with an attorney about your potential case.

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