Is a worker’s comp settlement tax free?

Asked on August 1, 2015 under Employment Labor Law, Indiana


M.D., Member, California and New York Bar / FreeAdvice Contributing Attorney

Answered 5 years ago | Contributor

Typically, benefits paid under a worker's comp settlement are tax exempt. In other words, these benefits are not normally considered taxable income at the state or federal level. The sole exception is if an individual also receives disability benefits through Social Security disability insurance SSDI or Supplemental Security Income SSI. In such a case, the Social Security Administration may reduce or "offset" a person's SSDI or SSI.

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