Property owners in New York have a legal duty to prevent visitors from being harmed on the premises. Whether the property is residential or commercial, the owner must take steps to remove any potential hazards that could cause guests to become injured. If you slipped and fell on someone else’s property in New York, you could be entitled to pursue compensation from the property owner through a premises liability claim, which is a specific type of personal injury case. Most New York personal injury claims settle before they ever reach the trial stage.
However, if you successfully secure a settlement, you might be wondering whether your settlement can be taxed. The good news is that compensation related to your injuries is generally not taxable, but other types of compensation can be subject to taxes. Below, we’ll discuss which damages are treated as taxable income and which are not.
Types of Damages Awarded in a Slip and Fall Accident Case
In New York, you could be eligible to obtain compensation for a few different types of damages through a slip and fall accident claim or lawsuit. These include economic damages, non-economic damages, and punitive damages.
Economic damages are financial losses you suffered due to the accident and your injuries. Some of the most common types of economic damages include:
- Present and future medical expenses
- Rehabilitative care
- Medical equipment costs
- Long-term care expenses
- Prescription medication costs
- Lost income, if you had to take time off work during your recovery
- Reduced earning capacity, if you are disabled by an accident and can no longer perform your previous job duties
- Other financial damages
If you lost a loved one in a slip and fall accident caused by a property owner’s negligence, you could also claim compensation for funeral and burial expenses, future lost income, and more.
Economic damages are not taxable in New York. Economic damages are not treated as income, but rather as a reimbursement for expenses incurred when treating your injuries. If you did not cause the accident, the at-fault landowner should be responsible for those costs.
Non-economic damages are essentially any non-financial losses you incurred due to the accident that caused your injuries. Sometimes referred to as “general damages,” non-economic damages are intended to compensate for any physical and emotional pain and suffering you endured after being harmed by someone else’s carelessness.
Non-financial losses can be somewhat difficult to quantify, given that they have no numerical value. Courts, insurance companies, and attorneys may use a couple of different methods to determine an amount for non-economic damages. Still, the more severe your injuries and personal suffering are, the higher that amount is likely to be. There is no limit to the amount of non-economic damages you can receive in New York.
Common examples of non-economic damages include:
- Physical pain
- Permanent disfigurement
- Mental anguish
- Emotional trauma
- Loss of consortium (sexual intimacy)
- Loss of enjoyment of life
- Anxiety, depression, insomnia, and other psychological effects of the accident
- Post-traumatic stress disorder (PTSD)
- Loss of opportunity
- Long-term pain and suffering
Non-economic damages for slip and fall accidents in New York are usually not considered taxable income, but rather reimbursement for your intangible losses. If you were injured in a slip and fall accident that a negligent property owner caused, you deserve to be compensated for the physical, mental, and emotional suffering you endured.
However, there are some cases where non-economic damages for pain and suffering are taxable. If a physical injury does not accompany the pain and suffering, and the plaintiff is exclusively seeking compensation for non-financial losses they suffered, the financial reward could be taxed.
For example, your settlement could be taxed if your reputation was tarnished because someone defamed you, but you were not physically harmed. You must have been physically injured for your non-financial damages to be non-taxable.
Courts do not commonly award punitive damages because the standard of proof is much higher than for economic and non-economic damages. The purpose of punitive damages is to “punish” the at-fault party for egregious behavior.
To be awarded punitive damages in a slip and fall case, you must go beyond negligence and prove that the property owner was excessively reckless or even malicious. There is no cap on punitive damages in New York.
Unlike other types of damages, punitive damages are taxable. This is because punitive damages are not designed to compensate for your losses. Their primary aim is to send a clear message to the defendant that their behavior was dangerous and to deter them and others from engaging in similar behavior.
If you are awarded punitive damages, they will be treated as income, and you must report whatever amount you receive to the IRS. Since some damages are tax-free and others are taxable, an attorney can help you break down the damages you are awarded and determine your tax obligations.
Factors that Could Affect Your Slip and Fall Accident Settlement
To successfully secure a settlement for injuries sustained in a slip and fall accident, you will need to prove that the property owner was at fault and that you incurred financial and/or non-financial losses. In addition to establishing liability, some of the main factors that could affect your final settlement for a slip and fall accident include:
- Partial liability – New York is a pure comparative negligence state. Even if a jury determines that you were partly to blame for a slip and fall accident, you are still legally entitled to pursue compensation. However, your final settlement amount could be lower than it would have been if you had not contributed to the accident.
- Statute of limitations – There is a three-year statute of limitations on slip and fall accident cases in New York. If you fail to file a lawsuit within that time frame, the court will most likely dismiss your case.