Are Workers’ Compensation Payments Taxable In Nevada?

Workers’ compensation can be an important source of relief after an accident at work. You might get a lump sum, weekly, or monthly payments. While these payments are helpful, many people wonder if they are taxed in the state of Nevada. 

Whether or not taxes impact your compensation is an important question. Your personal injury lawyer can help you evaluate your situation and provide some answers. However, the following is some general information that might help.

What Is Workers’ Compensation?

Workers’ compensation is a type of insurance that employers must hold by law. It provides benefits to employees who are injured or become ill due to their job. The insurance will cover medical expenses, lost wages, and disability benefits.

Employers are required to pay for this insurance, it is never paid for by the employee. 

Common Workplace Injuries That Qualify For Workers' Compensation In Nevada

Injuries in the workplace are not uncommon and often qualify for workers’ compensation benefits. These injuries, however, must have happened while performing your job duties. Examples of injuries that qualify include:

• Slip and fall injuries
• Back or spinal injuries
• Fractures or broken bones
• Head injuries or concussions
• Burns
• Cuts and lacerations
• Carpal tunnel syndrome
• Tendonitis
• Back or joint pain
• Exposure to toxic chemicals
• Hearing loss
• Respiratory illnesses
• Skin conditions
• Work-related PTSD

Why Workers’ Compensation Payments are Not Taxable in Nevada

Workers’ compensation payments are awarded to cover part of your lost wages while you are healing from your work-related injury or illness. This makes the payments compensation for an injury rather than earned income. Because of this, they are generally not taxed. This means if you receive any benefits for the following, you do not have to report them on your taxes as income:

• Temporary total disability
• Temporary partial disability
• Permanent partial disability
• Permanent total disability
• Death benefits

Understand The Exceptions: When Do Workers' Compensation Payments Become Taxable In Nevada?

While workers’ compensation is generally not taxable, there are exceptions to this that you should talk with your personal injury lawyer about. The exceptions are as follows:

Receiving Both Workers’ Compensation & Social Security Disability Benefits

If you are receiving both workers’ compensation and social security, you risk exceeding the amount of income you are allowed from these two sources. SSDI may reduce your payments to help offset this. The amount that is reduced is called workers’ compensation offset and it can be counted as part of your taxable income. 

For instance, you may qualify for $2,000 per month from SSDI and you are getting $1,500 per month for workers’ compensation. The government says your combined benefits cannot exceed 80% of your previous earnings. Let’s say you are allowed $3,000 per month, but your total combined amount is $3,500. SSDI will reduce your monthly amount by $500 and you will be taxed on this reduction.

Continuing To Work In a Limited Capacity

If you choose to go back to work in a limited capacity due to your injury, your income will be taxed per usual. However, the workers’ compensation benefits will not be taxed, even though you are working.

Retirement Payment If Retiring Early

Retiring early because of your injury can also cause taxes to come into play. Starting to receive a pension or retirement benefits will kick taxes into action and you will have to pay taxes on those income payments. This is dependent on which retirement plan you have, however. 

Should You Report Your Workers’ Compensation On Your Tax Return?

Generally, you do not need to report your benefits on your tax return. However, there are some cases where you might. If you receive social security disability insurance and these benefits are reduced to stay within the allowed income, you should talk with your personal injury lawyer to see if you need to report the reduced amount.

In the end, if you only receive workers’ compensation benefits with no social security disability insurance offset, no wages, and no taxable interest, you will not need to report the benefits as income. However, it is always helpful to consult with a lawyer to ensure this is the case in your specific situation.


About the Author:

Benson & Bingham Accident Injury Lawyers, LLC is a distinguished personal injury law firm based in Las Vegas, Nevada. Founded in 2003 by cousins Joseph L. Benson II, Esq., and Ben J. Bingham, Esq., the firm has grown to encompass five offices across the state, including locations in Downtown Las Vegas, Summerlin, Henderson, Reno, and Carson City .

With over 25 years of experience, Benson & Bingham have secured more than $600 million in settlements and verdicts for their clients. Their practice areas cover a wide range of personal injury cases, including car accidents, motorcycle and trucking accidents, slip and fall incidents, wrongful death, and workers' compensation claims .

Share This Article: