Many people who have been awarded a workers’ compensation claim are unclear as to whether or not these awards are considered taxable income. Unless you are receiving Social Security benefits, your award is not taxed. In some instances, you are not taxed even if you do receive benefits. Here are a few things to know in order to make the topic clearer.
Benefits are Offset
In some states, when you receive workers’ compensation and Social Security benefits, what you receive from workers’ comp offsets your Social Security benefits. When this happens, it is only because your award amount and your benefits are 80% or more of your average earnings before your accident.
When your benefits are offset, the amount by which your payments were lowered is considered taxable income. To use easy numbers, if your benefits were offset by $500, that amount of money paid to you by workers’ compensation is taxable. Again, this only happens when you are making 80% or more with your insurance payments and benefits than you were making before your accident.
Taxation and Social Security
To complicate things just a bit, Social Security benefits are not always taxed. You are only taxed on your benefits if your combined income is greater that $25,000 for a single person and $32,000 for a married couple. Your combined income is half of your benefits plus all other income.
Because of the rules involved, you may want to consult a tax professional. The ins and outs of tax law can be confusing and can change from year to year. If you are receiving workers’ compensation monies and Social Security benefits, it is advised that you seek the advice of an attorney or tax professional prior to filing your taxes.
If you need help filing for workers’ comp in South Carolina, call our office today. A member of our team will review the details of your case and advise you of your options. Call now or browse our website for more information about our firm and how we can assist you.