@mhomony Normally, workers' compensation benefits are not taxable. Neither the New Jersey Division of Taxation nor the Internal Revenue Service (IRS) taxes medical or disability benefits received through workers' comp.
However, retirement plan benefits are taxable if either of these apply:
- You retire due to your occupational sickness or injury
- Your workers compensation payments reduce your Social Security or railroad retirement benefits.
Also, you might need to include workers compensation as income if:
- You received the payments for an injury.
- You previously deducted related medical expenses.
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