Are Workers’ Compensation Benefits Taxable?

If you sustain an on-the-job injury in Oregon, then you will likely be able to recover compensation for your losses. The workers’ compensation system in this state is robust and typically provides full coverage of all medical bills related to the workplace injury as well as a significant portion of lost income. However, you need to know whether or not your workers’ compensation benefits are taxable or not.

What Benefits Are Available Through Workers’ Comp?

In the state of Oregon, individuals will typically be able to recover various types of benefits in the event they sustain a workplace injury. This includes:

  • Coverage of all emergency medical bills
  • Payment for ongoing medical expenses
  • Compensation for physical therapy or rehabilitation
  • Payment of prescription medications or medical devices

In addition to coverage of medical needs after a workplace injury, individuals will be able to recover lost wages if they cannot work during the recovery process. This includes two-thirds of the person’s average weekly wage before the injury. If a person can work, but at a job with lesser pay, they will receive two-thirds of the difference between the new lower pay and the higher pay they were receiving before the injury.

For those who sustain permanent disabilities as a result of their injury, there are other types of compensation available through the Oregon workers’ compensation system.

Will These Benefits be Taxed?

In general, workers’ compensation benefits will not be taxable. This includes taxes on all payments made for medical expenses as well as coverage of lost wages. The government allows these benefits tax-free because they realize that individuals are not receiving full reimbursement of their lost wages and that further taxation would hamper a person’s ability to make ends meet during an already difficult time.

However, there is one circumstance where workers’ compensation benefits may be taxable, and this includes when a person is also receiving Social Security disability benefits at the same time as their workers’ compensation benefits. In this instance, the workers’ comp benefits will offset the disability benefits period

What this means is that the workers’ compensation benefits will reduce the Social Security disability (SSDI). However, this will only occur if the combined total amount of benefits from SSDI and workers’ comp is more than 80% of the person’s average earnings before they were disabled. If this occurs, a portion of the benefits may be taxed if they exceed a certain monthly threshold.

Contact an Attorney

If you are wondering whether or not your workers’ compensation benefits will be taxable, or if you have any questions about recovering compensation after sustaining a workplace injury, you need to reach out to a skilled workers’ compensation attorney in Oregon as soon as possible. An attorney can help you through this entire process, beginning with right after the injury occurs, handling aggressive insurance carriers or employers, getting you through the appeal process if your claim is denied, and taking your claim to trial if necessary. Additionally, a Portland personal injury attorney can advise you about the financial experts you need to see in the event you are receiving both workers’ compensation benefits and Social Security disability benefits.