In most cases, workers’ compensation benefits are generally not taxable, which is a relief for those trying to get by on these necessary benefits. Workers’ compensation falls within the same category of other non-taxable income, such as public welfare fund payments, compensatory damages, disability benefits, and compensation for the permanent loss of or use of a body part. That said, there are situations in which a portion of these benefits might be taxed, so it is important to be aware of them.
Exceptions to Tax-Exempt Status
If you are receiving Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI), you will likely have to pay some taxes on your workers’ compensation benefits. The taxation typically will not apply to everything you received that year, but rather apply to a portion determined by the offset of your SSDI. For example, if the workers’ compensation benefits you receive amount to $600 a month and your SSDI benefits are also $600 a month, but the Social Security Administration believes you require $1,000 to live comfortably, your SSDI will be reduced to $400 a month. Thus, you would only be taxed on $200.
Additionally, just because workers’ compensation benefits are not taxable, does not mean other income you receive is free from taxation. Retirement benefits, investments, and money obtained through inheritance or won in lawsuits are all still subject to taxation.
Fighting for the Rights of Injured Workers
If you are ready to get started on your workers’ compensation claim, have questions regarding the process, are concerned about eligibility, or have questions about a denied or delayed claim, the Sacramento workers’ compensation attorneys at Smolich & Smolich can help you. Regardless of what stage you are in during the claims-filing process, our team will help you navigate your way through it.
We provide free consultations. Call us today at (888) 452-0703.