Do You Have to Pay Taxes on Money Received from an Insurance Claim?
It’s not uncommon for something to go terribly wrong which requires you to file an insurance claim. Most of us hate having to pay for insurance but when we receive money from an insurance claim following an accident or home damages, we breathe a sigh of relief that we had insurance, to begin with.
But then, you have to wonder whether you should set aside some of that insurance money to cover taxes that you may have incurred. Thankfully, in most cases, you won’t have to pay taxes on money received from insurance claims if you’ve been paying the premiums yourself – such as with auto insurance or homeowners insurance. That’s because your benefits are considered reimbursements for expenses rather than income.
When You May Have to Pay Taxes on Insurance Claims
As mentioned above, in most cases involving an insurance claim you won’t be required to pay taxes on as the benefits aren’t considered income. That being said, there are some exceptions to this rule. Here are a few situations where you may be required to pay taxes on the money received from an insurance claim:
- Life Insurance Claims – Death Benefits
- Dividends & Interest
- Disability Insurance
- Long-Term Care Insurance
Often, even with the above-mentioned cases, the money received from the insurance claim still isn’t considered taxable. There are different circumstances and that would determine if the funds are taxable – they also may differ by state. If you’re not sure whether you will need to pay taxes on your benefits, you may want to contact your insurance provider for clarification.
If you have further questions about a settlement or need professional assistance with an insurance claim, please give us a call today: (727) 843-0097