Do I have to pay taxes on any of the benefits paid to me in my workers’ compensation case?
Absolutely not. When you suffer a work–related injury and are provided workers’ compensation benefits, the benefits paid to you for your time off of work are not taxable. This is why you are paid 2/3 of your average weekly wages because part of that calculation assumes that the general American worker is paying approximately one third of their salary in taxes anyway. Consequently, by receiving 2/3 of your prior pay rate tax free, the amount you receive should be about the same as you were receiving from your employer after taxes were taken out of your salary. Additionally, when you receive medical treatment or a final award paying you for permanent impairment that you suffered as a consequence of your injury, as well as a value for your future medical care, none of these payments are taxable and, other than a small attorney’s fee, the money belongs to you as the injured worker, free and clear of any taxes.