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Do you have to pay taxes on workers' compensation?

If you're injured at work, you're usually eligible to receive workers' compensation for medical costs, rehabilitation and lost wages. It's a real blessing for men and women who've had the ability to make a living taken away from them. So it's natural to wonder whether Uncle Sam can get his hands on a piece of the workers' comp income you get.

Thankfully for most workers, the answer to that is no, workers' compensation payments are generally not taxable. They fall in the same category as disability benefits, public welfare and compensatory damages. However, there are some exceptions to this rule of thumb. When you're receiving both workers' compensation and social security disability, some of the SSI might be considered taxable. To figure it out, take half of your SSI and add it to any other income you have coming in.

  • Is that number higher than $25,000? Are you filing as single, married filing separately (and not living together) or as a head of household with a dependent child?
  • If you're filing jointly, does that number exceed $32,000?
  • If you're filing separately, but lived with your spouse, the magic number becomes $0, meaning you might be taxed on the full SSI.

As you can see, workers' compensation can get complicated when you throw taxes into the mix. If you're seeking workers' compensation or have questions about how it works, you may want to speak with an attorney. An attorney who's well-versed in workplace injuries may be able to help you fight to maximize your benefits and get you back on your feet.

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