Do I have to pay taxes on my workers’ compensation check?

Workers’ comp wage loss checks in Virginia are not taxable income.  Your workers’ comp payment is supposed to be 2/3 of your average weekly (gross) wages.  This amount is generally calculated based on the 52-week period before your injury.  The simplest way to put it is to add up your pay from the last year (assuming you worked at least 1 year for the same employer) and divide it by 52 weeks.  That should give you your average weekly wage.  Since this amount represents your pay before taxes, your comp check is 2/3 of the average weekly wage.  In other words, it should be close to what you used to get after taxes.

For instance, let’s say you got hurt on January 1, 2023, and are out of work because of your injury.  Let’s also say you worked for MegaCorp for all of 2022, and you made a gross pay of $900 per week.  This amount would include bonuses and certain “perqs” that may count towards your total compensation.  You probably took home around $600 weekly after the government got its cut.  Your workers’ comp check should be $600 weekly.  This is why your workers’ comp check is not taxed…..because, in a sense, you already paid the tax by only getting 2/3 of your gross pay. The same is true if you settle your workers’ comp claim. Workers’ comp settlements are not taxed.

As for Social Security Disability benefits, a different set of rules apply.  They can be taxed in some situations.  That would be the subject of another blog post…..

The statements contained here are for general information purposes only. This information is not specific legal advice to your situation. Mr. Shoen would need to meet with you individually to ensure client confidentiality and would need additional information not provided in this article. This article does not create an attorney-client relationship. Please consult directly with an attorney for legal advice.

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