Each state is free to makes their own decisions and tax laws concerning the taxability of lawsuit awards and settlement amounts. California is a state that suffers from financial turmoil although their residents make more than any other state in the United States. People who reside inside the city limits of San Diego have collected mesothelioma settlement cases and won lawsuits for their asbestos exposure. A tax on these funds could have a dramatic affect on the take home amount of each settlement.
Many citizens of California have filed claims against the mesothelioma trust fund. The fund was set aside by court order to help protect victims until each could recover the amount due them. The victim list is growing and the fund is shrinking, however. Payments are finally getting to the people who need them most and the lawyers who fought for the settlements are paid from these resources. California lawyers receive a payment only if the client receives a favorable award.
As the 2010 tax season approached, many of these families need to know if their settlement packages will be taxed as income in California. Also, San Diego residents need additional knowledge about the cities stance on taxing lawsuit and settlement revenue. A San Diego, California mesothelioma lawyer will be the best source for specific information.
California State Income Tax
Unfortunately, California has been cash strapped and wants to receive as much revenue from their citizens as possible. This would imply a tax be mandated on lawsuit and settlement awards. Thankfully, there has been a reasonable standard set in the state that only views the punitive damages part of the settlement as income for tax purposes. California has set a standard that lawsuit and settlement amounts must be taxed on the portion that is punitive in nature only.
This means any portion that is compensatory, will not be taxed. Also free of taxes are the amounts paid for emotional distress if the amount was to cover treatment for the emotional distress. The asbestos attorney can provide clients with specific advice and could possible give the advice free of charge in these cases. For planning purposes it is probably safe to assume, people who live in California will not have to turn over any of their lung cancer or mesothelioma settlement or lawsuit payments to the State of California.
What About the City of San Diego?
The city of San Diego residents are responsible for California state income tax. The tax can be as much as 9.3% in 2010 with an additional 1% for amounts over a million dollars. The state does not count the mesothelioma lawsuit settlement payments for asbestos exposure for anyone regardless of which city they reside in. The only exceptions are the punitive amounts of any award. Settlements must specify how much is for compensatory damages and how much, if any, is for punitive damages.
What About Mesothelioma for Federal Income Tax?
The U.S. IRS (Internal Revenue Service) taxes punitive damage lawsuit judgments and settlement agreement amounts as income. The amount taxed is based on the amount of the award that is declared as punitive. The portions of any awards or settlements that are deemed compensatory are not typically taxed under the federal tax laws.
Punitive amounts must be declared for federal income tax purposes and taxes paid on some portion of the dollar amount. Most mesothelioma trust fund settlements and lawsuit awards have been recognized as compensatory funds. Ask a mesothelioma lawyer in San Diego, California about conditions specific to a case.
