Do I Have to Pay Taxes on My Workers’ Comp Benefits?

If you sustain an on-the-job injury in Nevada, you will likely be able to collect workers’ compensation benefits. This typically includes complete coverage of the medical expenses associated with the workplace injury and could include some type of temporary or more permanent wage replacement. 

But, do you have to pay taxes on your workers’ compensation benefits?

The good news is that workers’ comp benefits in California are considered non-taxable income. Here, we want to discuss this further.

What are the Benefits Available Through Nevada Workers’ Compensation?

Workers in Nevada are able to receive various types of compensation if they sustain an on-the-job injury or occupational illness. This includes:

• Coverage of medical care. This includes all necessary medical coverage needed to treat the workplace injury or illness.
• Temporary disability. These types of benefits are designed to pay an injured worker for the time they miss away from work due to an on-the-job injury. This is typically two-thirds of the person’s average monthly wage. Under this category, there are temporary partial disability and temporary total disability benefits.
• Permanent disability. Permanent disability benefits occur if a person sustains a permanent loss of function or ability due to their injury or illness on the job. Under this category, there are permanent partial disability and permanent total disability benefits.
• Vocational rehabilitation. These benefits are designed to help individuals retrain for a new occupation if their injury or illness prevents them from returning to their old job.

Death benefits may also be paid to an injured worker’s dependence if the individual loses their life as a result of an on-the-job accident. Additionally, injured workers can receive mileage reimbursement for any expenses they incur for the cost of attending medical-related appointments.

You Will Not Pay Taxes on These Benefits

The good news is that injured workers in the state of Nevada will not have to pay taxes on the benefits they receive. Workers’ compensation benefits are typically tax-free for the entire time the individual receives them. Of course, there will be some exceptions to this, particularly if an individual receives both disability payments and workers’ compensation benefits.

When we examine Internal Revenue Service publication 17, we see that this publication says workers who receive compensation due to an injury or occupational illness are not subject to tax. The IRS does state that if individuals receive retirement benefits at the same time they receive workers’ compensation, the retirement payments are still subject to tax. IRS law specifically exempts these workers’ compensation benefits from being taxed at the state level as well.

If you or somebody you love has sustained a workplace injury, we encourage you to reach out to an attorney as soon as possible. When you have a workers’ compensation lawyer in Nevada by your side, you will have an advocate ready to stand up for your rights at every step. This includes pushing back against insurance carriers or employers if they deny a claim or refuse to pay appropriate benefits. An attorney will also handle any appeals needed to help you recover compensation.