Are workers' compensation benefits taxable in my state?

The answer to your question is yes, workers’ compensation benefits are taxable in California. According to the California Franchise Tax Board, workers’ compensation benefits are considered supplemental wages, which means they are subject to federal and state taxes, including California state income tax. If you are a nonresident of California and you receive workers’ compensation benefits from an employer in the state, California will tax the portion of the benefits you earned in the state. Also, if you receive disability benefits from the Social Security Administration after being injured on the job, those payments are taxable. This includes Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI). The only benefits that are not taxable are those awarded by a workers’ compensation court or agency. In California, workers’ compensation benefits are typically paid out in two components - medical payments and temporary disability payments. The temporary disability payments are taxable, but the medical payments are not. It is important to keep track of any workers’ compensation benefits you receive, as you may need to report them on your tax return. If you are self-employed, you may be able to deduct any medical expenses or other related costs that you paid out of pocket as a result of your injury. If you have any additional questions about workers’ compensation benefits and taxes in California, please contact your tax advisor for further guidance.

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Are workers' compensation benefits taxable in my state?

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