If I Receive Workers' Compensation Benefits:

Will I be taxed after my industrial accident?

Workers' compensation benefits generally are not taxed under state or federal law. However, if you receive workers' compensation in lieu of receiving Social Security disability benefits, they may be taxed.
Those who suffer industrial injury or illness, or the families of those who lose a family member to an industrial accident or disease, can pursue four different types of workers' comp benefits: Medical, income, death, and burial benefits. These benefits are paid by workers' compensation insurance carriers, self-insured employers or self-insured governmental entities.

Medical benefits will cover the cost of any necessary medical treatment it takes for you to recover after your injury. This may include surgeries, medications, and general hospital visits as well as rehabilitation. Income benefits under workers' compensation, like other workers' comp benefits, vary from state to state. Usually, a percentage of the injured workers' weekly income will be restored to them during their time off of work to compensate for lost wages. Death benefits under workers' compensation can include bereavement and related costs and are closely tied to burial benefits which cover the cost of a funeral if the worker is killed in the industrial accident.

Remember, your workers' compensation benefits can only be taxed if you receive those benefits instead of receiving your Social Security benefits. Generally, you do not have to worry about your workers' compensation benefits being taxed. If you are concerned that your benefits are being taxed unlawfully or are wondering what type of benefits you will be receiving after an industrial injury, it would be wise to seek legal counsel from a firm who is familiar with industrial injuries and construction laws.