Disability Law

Using Medical Costs to Lower Taxes on Emotional Distress Damages

By Patrick Hindert

Jeremy Babener, author of previous legal articles about structured settlements and taxation of personal injury damages, has published a new article titled "Maximizing the Medical Care Exception to the Tax on Emotional Distress Damages" in the September issue of Practical Tax Strategies.

Babener's new article, available on his Tax Structuring web site, continues and expands Babener's analysis of medical expense deductions in personal injury cases. S2KM featured Babener's recent, related article titled "Taking Medical Expense Deductions Before and After a Personal Injury Suit" in this August 30, 2010 blog post,

Synopsis of Babener's new article: settlement attorneys and consultants should be aware that physical injury damages generally are received tax-free. Non-physical injury (e.g. emotional distress) damages without a physical cause, however, generally are not received tax-free. Moreover, damages received for physical symptoms resulting from emotional distress are taxable. However, if structured correctly, damages received to offset medical care costs incurred as a result of the injuries should not generate additional tax liability. Babener's new article explains how to design a settlement to maximize use of the medical care exception in cases involving emotional distress damages.

Babener has been named a 2010-11 NYU Tax Policy Fellow. In that role, he currently works at the U.S. Department of the Treasury?s Office of Tax Policy. He anticipates receiving his LL.M. in Taxation from NYU School of Law in Spring 2011. The NYU School of Law Magazine recently featured Babener and his writing about structured settlements.

For S2KM's compendium of blog posts featuring Jeremy Babener's writing, see the structured settlement public policy wiki.

Full post as published by Beyond Structured Settlements on September 23, 2010 (boomark / email).