Workers’ compensation benefits aren’t taxable on a federal or state level. However, a portion may get taxed if you receive Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI). SSDI is a federal insurance program payroll that is tax funded. Workers receive social security benefits when you have a disability, you have paid social security (SS) payroll taxes for a certain amount of time (usually five to 10 years) and you have limited income. Learn how to get the best price on workers' comp insurance.