How Do Taxes Affect Your Case?
What does April 15th mean to you? Taxes, taxes, taxes is what it means to most people. I’m an attorney in Commack Long Island and my practice involves personal injury work for plaintiffs, real estate work and estate planning. All of those areas have tax implications. I’m not an accountant. I don’t profess to be one and anything that you hear in this recording you should verify with an accountant if it applies to you. So how do taxes affect your case? Here are some general things that I am asked on a regular basis.
Personal injury settlements and awards verdicts, the money that comes from that, Is that taxable to the client? Well, generally it is not. As with any other legal precept or rule there are exceptions. So, if you get an award whether it’s by arbitration or a verdict and there are lost wages involved, then that portion would be taxable. A settlement in a personal injury case for personal injury pain and suffering is not taxable. My fee is taxable. Why? Because it’s income.
The other area is real estate. A lot of people ask if I sell a piece of real estate or a co-op, do I have to pay capital gains tax? So, if you buy something low and you sell high, which is everybody’s goal, that profit in between those two numbers is your capital gain and you do have to pay tax. Well there’s an exemption amount of $250,000 for a single person or $500,000 for a couple. If the property is sold has been your primary residence for two out of the last five years. The exception here is if you use part of the premises for a business, or you rented it out to others then you may have depreciated it for tax purposes. There may be a tax implication there even if the exemption amount applies and wipes out any of the capital gain you realized.
The other area, is estates. Many people ask if they’re a beneficiary of an estate, meaning they got something from someone’s estate, do they have to pay tax on that? Generally, No. The exception: If there’s no cash available in an estate and there are assets that have to be liquidated, you could have to pay your pro rata share in taxes.
So again, I’m not an accountant. I’m not providing tax advice, but these are some of the issues we deal with on a regular basis and it affects every area of our practice. These frequently asked questions come up all the time this is just a few of them. If you have questions, please call us we’ll be happy to help.