Is Workers Compensation Taxable

Many wonder if the benefit of getting medical coverage for work injuries can be cut by tax. Since in a sense, workers compensation is somewhat the part of salary. This results in the question: is workers compensation taxable?
To provide employees of their rights in working, employer provides them workers compensation. Worker compensation is one of worker rights which is in the form of financial compensation paid for medical coverage. The medical care is for treating injuries resulted in accident happened while working.
Many tasks performed by employees are dangerous, to follow an easy example for that statement is the construction worker. In-site employees of construction have to be in contact of moving lots of heavy materials from place to place, which can be emphasized for its danger for its height and etcetera. The danger of performing the tasks resulted in workers compensation. The laws about workers compensation were first enacted in Europe and Oceania. United States was following to enact the law following after them.
Generally, workers compensation does not include for general damage of pain and suffering, and punitive damage resulted by employer negligence in which is not generally the issue of the case. Workers compensation is given to assure the employees that their medical cost paid for injuries resulted in working will be covered. Thus, employer will be made sure that negligence is far away, and the safety of the employees are also the top priority of the employer.

Is It Taxable?

Is workers compensation taxable? The answer is no. However, there is the case in which yours will be. Workers compensation is not taxable. This is according to the 19th page of Pub 525 which states that the amounts you receive as workers compensation for an occupational sickness or injury are fully exempt from tax. This is of course if they are paid under workers’ compensation act. Further full statement can be found in the Internal Revenue Service website which is the government organization whose job is to collect taxes and enacted laws related to domestic income of United States.
As it has been stated before, there is one condition in which your workers compensation is taxable. Your workers compensation is taxable if you also get Social Security disability benefits. This means that Social Security pays for those who have disability who are not able to work because of a medical condition which is expected to last at least one year or result in death. Your workers compensation will be taxed if your disability benefits have been offset by the workers compensation benefits.
The combination of workers compensation and disability benefits by Social Security can be reduced below certain point. In which it is called as workers compensation offset.  When does it apply? If you receive both compensation and disability benefits by Social Security, the amount combined can’t exceed more than 80% of the average of your current earning.
Is workers compensation taxable? No. But if you also have it alongside disability benefits by Social Security, then the answer is yes.

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