What are workers' compensation benefits in Ohio?

Workers' compensation benefits are payments provided to employees injured on the job or suffering from work-related illnesses. These benefits provide a wage replacement and other monetary benefits for workers who are unable to return to work due to their work-related injuries or illnesses.

Are these benefits taxable income in Ohio?

No, they are not considered taxable income in Ohio. This means you shouldn't include these benefits as income on your Ohio state income tax return.

What about my federal tax return? Do I report them there?

Workers' compensation benefits are also exempt from federal income taxes. You do not need to report these benefits as income on your federal tax return.

Can the taxability status of workers' compensation change in the future?

Although Ohio workers' compensation benefits currently are non-taxable in Ohio, tax laws can evolve. It's wise to stay updated with tax guidelines or consult a tax professional for compliance.

How are lump-sum settlements from workers' compensation treated for tax purposes?

Generally, lump-sum settlements related to workers' compensation aren't taxable. But, if your settlement includes compensation for elements beyond workers’ compensation benefits, such as a confidentiality agreement, the tax implications might differ. Consultation with a tax professional is recommended.

Where can I learn more about Ohio's taxation rules?

For the most recent and accurate information on taxation in Ohio, you can refer to Ohio's Department of Taxation website or consult a local tax professional.

Do the federal and state treat workers' compensation settlements differently for tax purposes?

No, neither the IRS nor the State of Ohio treats workers’ compensation benefits as income for tax purposes. This applies whether you receive a scheduled payment or a lump-sum payout.

Is the taxability of workers’ compensation contingent on the nature of the injury?

No. Ohio has a no-fault workers’ compensation system. Whether it's a broken leg on the job or a work-related occupational disease, the type of injury doesn't affect the taxability.

Are other forms of disability or injury benefits taxable?

It varies. For example, private or union pension payments after becoming disabled are taxed. However, benefits like VA disability payments and Supplemental Security Income aren't taxed. Always verify the specifics with a tax expert.

Where can I find more information about the federal and Ohio rules regarding the taxability of workers' compensation benefits?

More information for federal taxability may be found in IRS Publication 907, and additional information regarding Ohio may be found on the Ohio Department of Taxation’s website and in OAC §5703-7-08.


Please Note: You should always consult with a tax professional or the relevant state and or federal agency to ensure you have the most up-to-date information.