Many people are unaware of whether they should list insurance settlement taxes as part of their yearly taxes. The upside is that this form of tax is quite simplified as insurance benefits are usually not taxable. Legal fees, court fees and other expenses are not taxable.
In the case of a person receiving any money for damages paid to him or her, this amount will be taxable and has to be listed as part of the taxes for that particular year.
When one pays premiums, one can make use of those deductions to determine the exact amount of insurance settlement taxes that have to be recorded. Insurance companies are more than willing to provide statements to their customers on the exact amounts that were paid. It is also very important to obtain this information in written format so that it can be submitted as supportive documentation.
In the event of personal injuries, the money that a person received is not taxable as this money is used for medical care, rehabilitation and the loss of income. More exceptions are those for suffering of pain and for psychological injuries.
Earned interest on any settlements may be taxable and this is where most people are clueless whether to list these as taxable income or not. This interest on the settlement may be from non taxable items, but the interest itself will be taxable.
The best advice is to make use of a professional tax consultant to complete the tax return. These professionals are fully aware of which items are taxable and which are not.
Seeing as each person will have a different list of insurance settlement taxes, the professional consultant will make use of individual avenues and calculations to determine whether the items are taxable or not. No one person has the same tax return in this case and that is why it is most beneficial to turn to the professionals.