Are Florida Workers’ Compensation Benefits Taxable?
In the United States, most workers are used to having federal and state (if applicable) taxes being taken out of their paychecks. Because of this, many injured workers assume that their workers’ compensation benefits, received while recovering from an on-the-job injury, are also taxable. In reality, workers’ compensation benefits are only taxable in Florida in rare circumstances, though it is a good idea to verify that these exceptions do not apply in your case.
Income Replacement Is Not Taxable
In Florida, an injured employee will be evaluated and eventually receive what is known as an impairment rating. Based on this rating, they will be classified as one of four types: Temporary Partial Disability (TPD), Temporary Total Disability (TTD), Permanent Partial Disability (PPD), and those who are permanently and totally disabled, who generally do not receive workers’ compensation for long, instead being encouraged to apply for Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI), whichever fits their situation better.
None of the benefits granted by the state of Florida are taxable – PPD, TTD and TPD are intended as income replacement, and as such, they do not count as earned income, which is what the Internal Revenue Service (IRS) taxes each year. Between this and the fact that currently, Florida has no state income tax, an injured employee can rest easy in most cases, knowing that the funds they are relying on to pay the bills will not be cut in half by taxes.
Exceptional Circumstances
It is important to keep in mind that in addition to standard workers’ compensation benefits, jury awards or settlements with insurers in workers’ compensation cases are also generally granted tax free, given that they are also intended to replace earned income, rather than being earned income themselves. However, there is one exceptional scenario where at least part of one’s workers’ compensation benefits might be taxed, and it only applies if the person is receiving SSDI or SSI.
In general, the Social Security Administration is bound by laws requiring recipients to have no more than a certain amount in assets and/or income. As a result, if an SSDI recipient gets both that and workers’ compensation benefits, the SSA may “offset” the part of the recipient’s workers’ compensation benefits that would put them over the limit. If you receive SSI or SSDI, it is a good idea to check that none of your workers’ compensation benefits require an offset – if they do, you must pay taxes on that amount.
Contact A Maitland Workers’ Compensation Attorney
The last thing a person wants to worry about after being injured on the job is their tax bill. A knowledgeable Maitland workers’ compensation attorney from the Hornsby Law Group can help ensure that your finances are as they should be, so that you are able to focus fully on physical recovery. Call our office today to schedule a consultation.
Source:
irs.gov/faqs/earned-income-tax-credit/taxable-nontaxable-income/taxable-nontaxable-income
