In most cases, workers’ compensation benefits are not taxable at the federal or state level in North Carolina and South Carolina.
However, an exception to this rule can occur if you are also receiving Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI) benefits. In this case, if your workers’ comp benefit reduces, or offsets, your SSDI or SSI benefit, the amount of the reduction, or offset, is generally reported as a taxable benefit.
Yes, it’s confusing. But a workers’ comp or Social Security Disability attorney can help answer your tax questions.
Learn More: Q&A on Workers’ Comp and Taxes