Are Workers Comp Benefits Taxable?

The short answer is no, they are not taxable. The longer answer gets more complicated, but most will not have to worry about it.

The majority of workers’ comp benefits are not taxable at the state or federal levels. This can be a strong positive as you can work with the money you need right away. This changes if you have SSDI or SSI.

Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI) are the two items of supplemental income that can change the usual tax-exempt status of workers’ comp.

SSDI and SSI

If the injured worker in question is receiving supplemental security income at the same time, that is where taxes come into question.

The payments from social security will be the initial hit. The payments would face reduction. From there, the difference created by workers’ compensation would be taxable.

Social Security disability insurance operates in the same way.

The good news is that even with this penalty, the amount will often be negligible. If a lawsuit holds up compensation, then your lawyer can even negotiate around potential taxation.

1. The Rate of Taxation

Calculating how much of your workers’ comp and Social Security benefits may face taxation is simple. Follow these markers for determining general taxation.

If your benefits are more than $25,000 while you are not filing as a joint married couple, than they may face taxation.

If your benefits are $20,000 or more while filed as a joint married couple, then they may face taxation.

If you do separate filings while married and living with one another, then any amount of benefits may become taxable.

2. From Workers Injury to Disability

The most common time that an injured worker may be taking workers’ comp benefits and social security at the same time is through serious injury.

When a worker doesn’t have a complete recovery from their workplace injuries, they can apply for disability. Even with the best medical aid, this can often happen for severe injuries.

Even if they are able to return to work, they may still apply for some disability benefits.

Getting the Help You Need and the Benefits You Deserve

Are workers comp benefits taxable? While the answer has a lot of what if statements and social security dilemmas, we hope this guide through the details puts you in a better situation if the time comes.

Workplace accidents are a huge deal and not enough information is easy to find. That is why we are here. Whether you need to find a doctor or only some advice, Worker’s Comp Doctor is here to help. Contact us today for more information.