This is a common question — and you’ll be relieved to know that the most common answer for people in this situation is no.
Workers’ comp benefits aren’t considered “earned income” like your work wages, so payments for workers’ compensation aren’t typically subject to either federal or state taxes. Any benefits paid to survivors of workers’ comp death benefits also shouldn’t have to pay taxes on those benefits.
There are a few scenarios where taxes may be due.
For example, if you return to a modified position at work due to your injury, any wages you receive on the job will be taxable as usual. In addition, any supplemental benefits (like social security disability) may also be taxed.
Continue reading to learn more about the ins and outs of workers’ comp taxes.