Do I have to pay taxes on my workers comp settlement?

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Question:

Do I have to pay taxes on my workers comp settlement?

Answer:

A common question received about benefits is, “are workers comp benefits taxable.” This question is often considered based on filing income tax. What you should realize is that unlike standard income you might receive from your employer, you do not have to file income taxes in the same way for workers compensation benefits. Although you may need to report this information, you may not have to pay taxes on it. If you are unsure if you do need to pay taxes, or are interested in more information, contact an attorney focusing on workers compensation or your tax professional. Your situation may be unique.

Taxes or Not?

While most income you receive must be reported as income unless it is specifically listed as exempt income, you may not have to file and pay taxes on your workers compensation claim. Here are a few things you should know about this:

  • You usually do not have to pay taxes on workers compensation claims, including any settlement you receive or benefits you receive.
  • The benefits must be paid under the state’s act or statute that governs the workers compensation program in that state.
  • You may be required to pay taxes on these funds, however, if they are offset by Social Security or other types of benefits you receive.

In many situations, workers compensation benefits are provided due to an injury or accident you did not cause yourself. Therefore, paying income tax is often not necessary. However, each situation is unique which is why you should consider hiring an attorney before filing your taxes.

This article is provided for informational purposes only. If you need legal advice or representation,
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This site does not provide legal advice and users of this site should not interpret any of the information presented here as legal advice. The information provided merely conveys general information related to commonly asked legal questions. We are not a law firm and the employees responding to questions are not acting as your legal attorney. You should ultimately consult with a lawyer for your case.

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