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Can New Jersey workers' compensation benefits be taxed?

This time of year, taxes are on the to-do lists of many in Camden County. For those who are expecting tax refunds, they are likely planning on either stashing the money away or making a special purchase. For local victims of workplace injuries, though, personal finances can be extremely difficult during tax season and throughout the year.

For those who are still working on obtaining their workers' compensation benefits, money can be extremely tight. A New Jersey workers' compensation lawyer can help an injured worker seek the benefits he or she needs. Those who have been hurt at work may have a variety of questions about workers' comp benefits and how they can be obtained. One question that comes up often after the first of the year is whether or not New Jersey workers' compensation benefits are considered taxable income.

In New Jersey, workers' compensation benefits are generally not taxable. This is due to NJSA 54A:6-6, also known as the New Jersey Gross Income Tax Law. According to the Internal Revenue Service, workers' comp benefits are tax-exempt so long as they are paid out under either a workers' compensation act or a statute "in the nature of" a workers' comp act. The tax exemption regarding workers' comp benefits also applies to survivors. However, for people who have retired due to a workplace injury or an occupational disease, the tax exemption typically does not apply to retirement plan benefits.

For victims of repetitive stress injuries, occupational diseases and other workplace injuries, it's key to obtain the appropriate workers' compensation benefits. Learning more about New Jersey workers' comp benefits can be aided by a consultation with an attorney.

Source: New Jersey Department of Labor and Workforce Development, "Frequently Asked Questions," accessed Feb. 7, 2016

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