The loss of a loved one to a fatal accident is a horrible tragedy. A wrongful death settlement can never be enough to make things right. Though it can help you provide financial support to help the grieving family navigate such a difficult experience. You may be wondering: Will you have to pay taxes on a wrongful death settlement in South Carolina? The answer is no unless the settlement includes compensation for punitive damages. Here, our South Carolina wrongful death attorney explains the key things to know about taxes and settlements.

Wrongful Death Settlement Taxable? Not in South Carolina

A wrongful death claim is a type of civil action that is designed to compensate grieving families for the damages that they endured because of their loved one’s passing. Is a wrongful death settlement considered income for tax purposes? As a general rule, the answer is no under both federal law and South Carolina law. However, there is a narrow exception for punitive damages. Here is a more detailed explanation of the tax implications of a wrongful death settlement in South Carolina:

• Economic Damages (Not Taxable): In South Carolina, economic damages in a wrongful death settlement include things like lost wages, out-of-pocket medical expenses related to the fatal injury, and funeral and burial costs. They are generally not considered taxable income under federal or state law. The IRS excludes these amounts from income because they are meant to replace actual financial losses caused by the wrongful death. Instead, these damages restore the family to the financial position they would have been in if the loss had not occurred, rather than providing a taxable gain.

• Non-Economic Damages (Not Taxable): The harm caused by a wrongful death is primarily non-economic in nature. Non-economic damages in a wrongful death case include things like compensation for grief, loss of love, loss of companionship, and loss of parental guidance. A key point to know is that these damages are also not considered taxable income in South Carolina. Federal and state tax rules treat these payments as arising from a physical injury or illness, making them excludable from gross income.

• Punitive Damages (Taxable): Punitive damages can be part of a wrongful death settlement in South Carolina. Though that is relatively uncommon, if they are included, they are the exception. Punitive damages are taxable income under IRS regulations. There is no specific South Carolina statute that excludes the taxability of wrongful death punitive damages by the federal government. Families who receive punitive damages should plan ahead for the potential tax liability. An experienced South Carolina wrongful death lawyer can help.

Contact Our Anderson, SC Wrongful Death Lawyer Today

At The Law Office of Steven M Krause, PA, our South Carolina wrongful death attorney is a compassionate advocate for justice. If you have any questions about taxes and wrongful death settlements, we can help. We serve clients everywhere in SC. Call us now or contact us online for a free, no-obligation consultation..

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Steven M. Krause

Steven Krause is a personal injury, auto accident, and workers’ compensation lawyer who practices in Anderson, SC. He graduated form the Thomas M. Cooley School of Law and has been practicing law for 40 years now. Steven Krause believes in fighting for the injured. Learn more about his experience here.