Are workers' compensation benefits taxable?

In Washington, the general answer is no, workers’ compensation benefits are not taxable. Workers’ compensation benefits are payments that cover medical expenses, time off work, wage replacement, and other costs resulting from work-related injuries or illnesses. Since they are considered to be no-fault benefits, they are not considered taxable income. This means that you do not need to report them when you file your taxes. The only exception to this rule is if you receive a settlement from an employer for damages that are related to a work-related injury or illness. In these cases, the settlement amount and any interest earned on the settlement are considered taxable income. You will need to report this income on your taxes. Finally, if you receive benefits from a workers’ compensation policy that is taken out by your employer, then these benefits are also not taxable. This includes benefits for disability, death or other related expenses. The only time when these benefits become taxable is when the employer makes a direct contribution to the policy. In this case, the employer’s contribution is treated as taxable income. In conclusion, most workers’ compensation benefits in Washington are not taxable, unless you receive a settlement for damages related to a work-related injury or illness, or if your employer makes a direct contribution to the policy. You should speak with a tax professional if you have any questions about the taxation of workers’ compensation benefits.

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Are workers' compensation benefits taxable?

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