2026 tax year
Is workers’ compensation taxable?
Workers’ comp for a job injury is tax-free. The one catch is when it reduces your SSDI.
Workers’ compensation paid for a job-related injury or illness is not taxable, not federally, and not by any state. It does not go on your return as income, you do not get a W-2 or 1099 for it, and it does not count toward any income-based threshold. This is one of the clearest rules in the tax code, and it holds whether the payments are weekly wage replacement, a lump-sum settlement, or medical benefits.
The one place it interacts with tax is the SSDI offset. If you receive SSDI and workers’ comp at the same time, Social Security caps the combined amount and reduces your SSDI by the overlap. That reduced-and-shifted portion, the “workers’ comp offset”, is treated as if it were SSDI, so it can be taxable under the SSDI formula. Only that offset amount is ever exposed to tax; the rest of the workers’ comp stays fully tax-free.
Add your workers’ comp below, and add any other household income to confirm it changes nothing. If you also receive SSDI, add that too and use the SSDI page to see how the offset is treated, the two benefits together are where the only tax question lives.
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Where this comes from
The rules on this page that are specific rather than general are cited below. Follow a link to read the provision itself rather than taking our word for it:
- Amounts received under a workers’ compensation act for a work-related injury or illness are excluded from gross incomeIRC 104(a)(1)
- Social Security and SSDI are taxed on a combined-income formula counting half the benefit plus other income, to a maximum of 85%IRC 86(a)-(b)
Related
- All benefit calculators
- How much of your SSDI is taxable
- Is your short-term disability benefit taxable?
- Is your long-term disability benefit taxable?
- SSDI and long-term disability together
- Tax on Social Security and a 401(k)
- Household calculator
General information about how these benefits are taxed, not tax advice. Disability and benefit taxation turns on facts about your policy and your household that this page does not have, check with a tax professional before relying on a figure here.