PIP provides for 80% of your medical expenses (up to $10,000) or 60% of your lost wages (up to $10,000). To suggest a PIP deductible to a client without enumerating the value of the coverage invites an E&O claim. Sometimes, tax language in a legal settlement agreement can make a big difference in the tax treatment and how the IRS sees it. PIP insurance can pay for medical bills, lost wages and more after a car accident. If, for example, you have a claim for emotional distress or employment discrimination, but no actual physical injury, then your settlement or verdict would be taxable unless you can prove even the slightest amount of physical injury. Minnesota's PIP insurance requirement makes it a "no-fault" state. In this regard, PIP is the same as DLA, which is also tax-free income. Your deductible is the portion of a claim that you pay. That's one of the … Again, paying less on your premium is not worth missing out on having PIP money immediately available after a car wreck. See the rules for your state. This is not something we would recommend that you do. Each of those states has its own set of laws when it comes to PIP. Remember that the settlement or verdict is non-taxable only as long as it arose from a physical injury. In this article, we explore New Jersey's laws regarding PIP … Is PIP taxable? How does the PIP Deductible work? PIP does not count as taxable income, so it has no effect on the amount of tax you pay. Since the $5,000 payment is merely reimbursing you for the money you spent, it is not income and not taxable. The formula to see how much PIP pays a medical provider is: PIP payment = (Total bill – PIP deductible) x 80%. As an example, if you incurred $5,000 in medical bills after an auto accident, your personal injury protection (PIP) coverage would reimburse you for those expenses. If I can be of service to you, please call me, Irene Morrill, Vice President of Technical Affairs at 800.870.7091 or email me at imorrill@massagent.com. Personal injury protection (PIP) is a mandatory form of car insurance for drivers in Minnesota. Let’s look at some examples to explain how a deductible affects PIP payments. Minnesota Personal Injury Protection (PIP) • $40,000 per person, per accident (this amount consists of $20,000 for medical costs and $20,000 for non-medical costs, like lost wages) • PIP benefits pay for the insured person's medical and non-medical costs after an accident. If we are talking exclusively about No-Fault PIP medical benefits (which pay for a victim’s accident-related medical expenses), then the answer is “no.” PIP is not taxable. Personal injury protection is often misunderstood. Be careful when you are initiating your policy, as you can accept a deductible of $1,000 or opt out of PIP benefits entirely. PIP is required by Florida law (along with Property Damage liability) when you purchase an Auto Insurance policy. Personal injury protection car insurance is required in 12 states. Selecting a deductible can lower the cost of the premium for this coverage. Also, PIP, like DLA, is payable whether you are in or out of work and regardless of how many hours you work or how much you earn. The Standard PIP limit is $10,000 per person, per accident. PIP - Deductible When you purchase PIP coverage, you have the option of selecting a deductible. In Minnesota, PIP … PIP pays for your own costs relating to medical care and income loss as a result of an injury you sustained in a car accident. Example – $1,000 PIP Deductible and $2,781 hospital bill: Assume you are in a car in Florida, and you are covered by PIP with Progressive.