In general, compensation for damages received through an accidental injury case, such as a traffic accident or a fall, is not subject to income tax. However, not all amounts are subject to income tax, and there are exceptions where income tax is applied. Most of the compensation received through an accident injury case is for medical expenses for physical injuries suffered as a result of the accident. However, often a portion for lost wages is included. Due to an accident, you cannot go to work for as short as several days or as long as several months, and there are days when you cannot work due to outpatient treatment at the hospital or rehabilitation treatment, etc., resulting in unnecessary loss to wages compared to before the accident. The loss of these wages is therefore also included in the compensation. This compensation for lost wages is considered income by the IRS, so be careful when filing your taxes. We recommend that you consult with an accountant or lawyer for details. Also, compensation for damages for the purpose of treatment for an injury itself is not considered income, but care is needed in the case of welfare benefits. If you are a beneficiary of public welfare benefits, such as Medicaid, Food Stamps, or SSI (Supplemental Security Income), or if you are applying as a beneficiary, depositing this damages in your bank account may affect your eligibility for welfare benefits required by each government agency. Therefore, please consult with an expert before receiving and depositing the compensation. Finally, there is a system called punitive damages. It is a system that imposes a much higher amount of compensation in addition to compensation for actual damages if the perpetrator’s act is intentional, malicious, or unethical. The cost can be up to 10 times more than the actual damages. A representative case is the McDonald’s coffee lawsuit in the United States in 1994. Victim with grievous injuries from hot coffee to third-degree burns seeks damages for treatment costs and punitive damages for selling a defective item because McDonald’s coffee was hot enough to cause serious injury . The victim’s lawyer demanded $300,000 for both treatment costs and punitive damages, but McDonald’s offered $90,000 and refused. In the end, the court recognized 20% of the victim’s negligence, $160,000 for treatment and $480,000 for punitive damages, for a total of $480,000. It awarded damages of $640,000. For reference, McDonald’s initial cost was $800. This is damages imposed for the purpose of inflicting punishment on the perpetrator in civil trials, including accidental injury cases. It is a preventive measure to prevent the perpetrator from repeating the same illegal act by forcing the perpetrator to pay a large amount of compensation in addition to the amount corresponding to the damage or damage. There is an action aspect. If punitive damages are included in the total amount of damages, that portion is considered income by the IRS. Therefore, when filing a tax return, you need an expert’s consultation on this part, and more detailed information can be found on the US Internal Revenue Service website. If you have suffered an accidental injury, we recommend that you always consult with an experienced and reliable accidental injury attorney, a recognized accidental injury attorney in the field. If you have any questions regarding accidental injury law, please feel free to contact us at mail@songlawfirm.co