Is Workers’ Compensation taxable?

Ask NJMoneyHelp

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Q. Is Workers’ Comp taxable?
— Unsure

A. Certain items of income are specifically exempt from New Jersey tax and should not be included when you file a New Jersey return.

Workers’ Compensation is one of those exempt, non-taxable items, said Cynthia Fusillo, a certified public accountant with Lassus Wherley in New Providence.

She said other items in the non-taxable category for the state include Social Security and Railroad Retirement benefits, unemployment compensation, income tax refunds, U.S. military pensions and survivor benefit payments, just to name a few.

Workers’ Compensation is generally exempt from federal taxation, she said.

“Workers’ Compensation includes amounts you receive for a job related illness or injury,” Fusillo said. “As long as the payments are made under a workers’ compensation act or statute, they will be exempt.”

This exemption also extends to survivors, Fusillo said.

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