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Are Worker’s Compensation Benefits Taxable?

Posted by B. Patrick Agnew | Aug 25, 2013 | 0 Comments

One of the most frequent questions that a Richmond worker's compensation attorney answers is whether worker's compensation benefits are taxable. In short, the answer is “no.” Virginia worker's compensation benefits are not taxable. But before dismissing the IRS and your tax obligations completely, you should know that there are some tax complications regarding benefits and The post Are Worker's Compensation Benefits Taxable? appeared first on Agnew & Rosenberger Virginia Law Firm.

One of the most frequent questions that a Richmond worker's compensation attorney answers is whether worker's compensation benefits are taxable.

In short, the answer is “no.” Virginia worker's compensation benefits are not taxable. But before dismissing the IRS and your tax obligations completely, you should know that there are some tax complications regarding benefits and compensation for workplace injuries outside of worker's comp. And some of these might require paying taxes.

Tax Exempt Worker's Compensation Benefits

According to the IRS, the amount you receive as workers' compensation benefits is fully tax exempt. To be tax exempt, the benefits must be paid under the state worker's compensation act. If you are unsure of the source of your benefits, you may want to talk to a Richmond worker's compensation attorney to see if your benefits are tax exempt.

Benefits That Are Taxed

To confuse the issue, there are various benefits closely tied to worker's compensation benefits that may be taxed. These can include:

  • Retirement Benefits. If you retire due to a workplace injury or illness, the retirement benefits you receive such as those based on your tenure, age, and prior contributions to a retirement plan may be taxable even if you would not have retired but for the injury.
  • Social Security Disability Benefits. If your worker's compensation benefit reduces the Social Security Disability benefits that you would have received, that part of your worker's compensation benefit may be taxable. This can get confusing, and you may want to talk to a Richmond worker's compensation attorney to understand your tax obligations if this applies to you.
  • Light Duty Work. If you are receiving worker's compensation benefits and you return to work on a light duty assignment, the pay you receive for the light duty work is generally taxable.

The post Are Worker’s Compensation Benefits Taxable? appeared first on Agnew & Rosenberger Virginia Law Firm .

About the Author

B. Patrick Agnew

B. Patrick Agnew was born and raised in Roanoke, Virginia and Bedford County. He received his undergraduate degree from Liberty University and studied philosophy and government. Patrick received his law degree from the Regent University School of Law.

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