Is TAC compensation taxable?
What are the TAC compensation scheme, there are four main entitlements. These are;
The payment of medical and like expenses, income payments, impairment benefit lump sum and common-law lump sum.
This page will look at whether particular entitlements from the TAC are subject to tax.
Medical and like expenses
There is no tax payable in relation to any money you receive that relates to the payment of medical and like expenses.
This means that you will not have to pay tax if you are compensated for medical treatment received which includes doctors attendances, medication, physiotherapy treatment etc.
Income payments received from the TAC a taxable just as your regular wages would be taxable.
In general, you will continue to be paid by your employer in a similar fashion to how you were being paid prior to the accident, and the TAC will pay them. Tax will be withheld from your gross income before it reaches you.
Impairment lump sum
No matter how much compensation you obtain by way of an impairment lump sum claim under a TAC claim, no tax is payable.
This is because all compensation obtained under an impairment lump sum is considered to be compensation for pain and suffering so it is not classed as income.
Common law lump sum
This is the second lump sum claim under the TAC system.
You can be compensated for pain and suffering and loss of earnings.
Even if you obtain a lump sum that includes compensation for loss of earnings, you will not be required to pay tax on any settlement amount.
This means that regardless as to the amount that you resolve a common law lump sum for, you will not be required to pay tax.
The only amount that should come off a common law claim in most cases is your solicitors bill (which is made up usually a professional costs and disbersements).
Income payments from the TAC are the only entitlement under the TAC scheme that is subject to tax. All other entitlements will not be taxed, regardless as to the amounts involved.