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Are Workers’ Compensation Benefits Taxable?

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Workers’ compensation insurance is a government program managed by each individual state; the pool of resources is comprised of payments, required by law, that employers of a certain size and scope must pay – this fund compensates individual employees in the event he or she suffers injury on the job. And for good reason. According to the Bureau of Labor Statistics, 2.9 million non-fatal workplace injuries and illnesses occurred in 2016, including 892,300 cases requiring days away from work.

However, with the end of tax season right around the corner, one of the main questions we receive is: Are my workers’ compensation benefits taxable?

Are workers’ compensation benefits taxable income?

Typically, at the state or federal level, these benefits are not taxable, and payments to survivors are exempt as well. However, when an individual also receives Social Security Disability (SSDI) benefits or Supplemental Security Income (SSI), if employees receive worker’s compensation on top of either of those subsidies, there are some instances when the Social Security Administration (SSA) will reduce one or both of those payments to lower the individual’s earnings below a certain threshold.

If workers’ compensation reduces your Social Security benefits, this reduction is like Social Security income, and thus, may be taxable.

If you have any further questions about workers’ compensation and their relation to taxes, contact our office today. We have over 30 years of experience when it comes to work injury law and can assist you with all your needs.


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