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Can an insurance company deduct a portion from your loss wages based on fed and state taxes normally paid on your wages?

Can an insurance company decide they are not going to pay you full loss wages because you normally pay federal and state taxes to your employer?


No they cannot.

If you are being compensated for wage loss, then this "income" (the payment by the insurance company) is taxable. The IRS and State will want their cut (at the end of the year when you have to declare your income). Therefore, to be fully compensated, they will have to take into account the amount of tax.

However, this does not apply for payments for pain and suffering.

Pain and suffering is not income for taxable purposes.

I hope this helps,

Good Luck,
Auto Insurance Claim Advice
Spokane Washington

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