You do not get a deduction for the worker's compensation offset.
Enter on your income tax return:
- The amount in the PINK box shows the reportable amount paid by SSA. Ignore everything else.
- The IRS cross matches Box 5 on the SSA-1099 with your income tax return.
Per IRS Publication 525 Taxable and
Nontaxable Income page 19 Workers' Compensation :
- If you receive both Social Security Disability and Workers Compensation Benefits: Social Security Benefits are taxable to a certain extent.
- If you receive both Social Security Disability Benefits and Workers Compensation, then Social Security may be reduced by a certain amount due to your receipt of Workers Compensation Benefits (you can only receive up to 80% of your pre-disability earnings form both sources, otherwise, Social Security reduces its benefits).
- The IRS tax you on the FULL amount of the Social Security Benefit, even if it has been reduced by Workers Compensation.
Additional information:
Social Security How Workers'
Compensation and Other Disability Payments May Affect Your Benefits
