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Are Minnesota Personal Injury Settlements Taxable?

by | Apr 8, 2018 | Firm News, Minnesota, Personal Injury

Congress just rewrote the tax code. So, if you’ve recently been injured in an accident, this question is probably on your mind.

Taxes and the law intersect a lot and there were some major changes in this area. For example, alimony payments may not be tax deductible after 2018. That change will dramatically affect a large number of families. However, the part of the tax code controlling Minnesota personal injury settlements did not change.

Generally, if money is related to a physical injury, it is not taxable. That category includes both direct and indirect damages. If the jury awards punitive damages, this money may be taxable. However, punitive damages are not very common in individual Minnesota personal injury cases. At Carlson & Jones, we usually partner with tax attorneys to clear up any uncertainties in this area.

What are the Economic Damages in a Minnesota Personal Injury Settlement?

Earlier, we mentioned direct and indirect damages. Sometimes, this money is called economic and noneconomic damages.

A serious car crash, dog bite, or other Minnesota personal injury case triggers lots of medical bills. Dog bite medical expenses have shot up 50 percent since 2003. For liability reasons, many health insurance companies do not pay injury-related medical expenses. Most families do not have the funds to cover these expenses, and most providers demand prompt payment.

Largely because of these factors, medical expenses are often the largest component of a Minnesota personal injury settlement. At Carlson & Jones, we send letters of protection to medical providers very early in the case. These letters guarantee payment once the case is resolved. So, the providers charge no money upfront. As a result, victims get the treatment they need and not just the treatment they’re able to afford.

Lost wages are often very significant as well. For example, Americans lose 95 million workdays a year to slip-and-fall injuries alone. In many ways, the lost wages may be more disruptive than the medical bills. For example, a dried-up income stream means that many families struggle to pay their living expenses. They count on large Minnesota personal injury settlements to help them catch up on bills. That’s why our lawyers fight so hard for fair compensation.

As a side note, your employer cannot fire you for missing work due to injury, in most cases. Certain federal laws, such as the Family Medical Leave Act, generally prohibit such actions.

Property damage is the third component of economic damages. This portion of the claim often settles much more quickly than the other parts. Insurance company lawyers can contest the effects of an injury on certain individuals. But it’s very hard to argue with a repair bill.

Lost property has an emotional component in addition to a monetary value. The family car may only be worth a few thousand dollars in the Blue Book, but it also has substantial sentimental value. A Minnesota personal injury settlement should reflect the noneconomic component as well.

Are Noneconomic Damages Included in a Minnesota Personal Injury Settlement?

Emotional injuries go well beyond lost property. Noneconomic damages, such as pain and suffering, loss of enjoyment in life, and emotional distress, are often substantial. Minnesota is a no-fault insurance state, so the law works a little differently here. To be eligible for noneconomic damages, the victim/plaintiff must:

  • Have at least $4,000 in medical expenses,
  • Sustain a “permanent” injury, or
  • Be unable to perform daily activities for at least sixty days.

Sometimes, Minnesota victims must also meet the no-fault test to receive compensation for property damages.

A few other no-fault states have extremely high thresholds and only the most serious incidents qualify. But the Minnesota threshold is fairly low. Almost any hospitalization will significantly exceed $4,000. Moreover, a serious broken bone could be a “permanent” injury. There is usually some loss of mobility or a surgical scar. Finally, the sixty days usually need not be consecutive. Many people have good days and bad days for several months after a serious fall or car crash.

How Do I Get a Settlement?

Insurance companies make money by collecting premiums and not by paying Minnesota personal injury settlements. So, this money is difficult to obtain, because insurance company lawyers fight hard to deny fair compensation.

At Carlson & Jones, we build successful cases with solid evidence and an appropriate legal theory. In a car crash case, that evidence usually includes things like the police accident report, witness statements, the vehicle’s Event Data Recorder (which is like an airplane’s “black box”). The theory is usually impaired driving, distracted driving, drowsy driving, or a vehicle code infraction.

Surprisingly, only about 3 percent of civil cases go to trial. Most of these disputes settle through informal or formal mediation.

Throughout the case, a personal injury attorney usually exchanges settlement offers with the insurance company. Sometimes, the two sides reach an agreement even before a lawsuit is filed. If there is no informal settlement, the Minnesota judge usually orders the case to formal mediation. There, a neutral third party tries to facilitate a settlement. Voluntary formal mediation is successful about 75 percent of the time.


An aggressive attorney can often settle personal injury claims fairly quickly. For a free consultation with an experienced personal injury attorney in Minnesota, contact Carlson & Jones, P.A. Our attorneys have over fifty years of combined experience.