If I Receive Workers' Compensation Benefits, Will I Be Taxed?
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 benefits
- Income benefits
- Death benefits
- 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, such as:
- General hospital visits
Income benefits under workers' compensation 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 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 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.