Taxes & Workers' Compensation in Florida

Q: Will I have to pay income tax on my disability benefits?

In most cases, no. In Florida, we have no state income tax. Worker's compensation disability benefits are income tax free under Section 104 of the Internal Revenue Code. Disability benefits paid for in line of duty injury for public employment are similarly tax exempt, however, disability benefits for private employee pensions are taxable. The reason has to do with a complicated provision in the tax code.

There are certain circumstances where benefits maybe taxed, and you either want to check with your worker's compensation attorney or the tax specialist to see whether or not your particular situation involves taxable benefits.

Q: Should I report my workers' compensation benefits on my tax return?

Although benefits secured under workers' compensation are not taxable, if you rely on the expertise of a CPA or an accountant when filing your taxes, you should at least disclose to the CPA or accountant that you did receive the workers' compensation benefits and then defer to their expertise as to whether or not it should be disclosed.