Can I claim Tax Deductions on Workers’ Compensation?

A workplace injury or illness is a traumatic experience. It could leave you in physical pain, financial worries over paying bills and medical treatment, and emotional distress.

Fortunately, the workers’ compensation system ensures that injured workers can claim benefits until they can resume work. A common concern among injured workers is the effect of work comp benefits on their taxes.

Generally, workers’ compensation benefits for work-related injury or illness are not taxable, unless the amount received is only to cover lost wages. However, receiving workers’ compensation benefits can affect the filing of your taxes.

Both weekly benefits and lump sum workers’ compensation payments are tax exempt. In other words, you would not receive tax notification documents for your payments, nor do you need to file your work comp benefits as income when filing your taxes.

However, if you are receiving both Social Security Disability and Workers’ Compensation benefits at the same time, it could be a tax obligation. Your work comp lawyer can help you understand this better.

WORK-RELATED DEDUCTIONS

Workers’ compensation benefits are paid to an injured worker to compensate for the losses caused by the said illness or injury. They may be paid by the employer’s insurer or through the employer. Apart of these payments is meant to cover lost wages, but workers’ compensation is not a wage. Since you cannot resume work, you are exempt from work-related tax deductions.

WORKERS’ COMPENSATION RELATED DEDUCTIONS

You might need to present a medical certificate to the workers’ compensation authority to receive your benefits. If you have to travel to get this document, you may get a tax deduction for the travel costs. A travel tax deduction on workers’ compensation can also be claimed for the distance traveled from your doctor to the paying authority and back home. For example, if you have to travel to your doctor twice to get a medical certificate and it costs you $40, you can claim this amount as a tax deduction, depending on where you live. But this does not apply to medical treatment appointments.