Sick pay to supplement a workers' compensation injury, taxable or not?

BigBillyBob — Tue, 24 Feb 2026 07:18:08 GMT

I suffered an on-the-job injury resulting in me being placed on workers' compensation disability payments. These payments however only cover about 1/2 of my salary and none of my benefits. My work however allows us to use our sick leave, vacation, and CTO to cover the other half of our salary and continue our benefits. My work is claiming that the pay they give me using my leave credits is taxable, however, I would not be using them except I was injured from a work related injury. I believe these still fall under the workers' compensation tax exempt status because it has a direct correlation to an on the job injury. Does anyone know where I can find it in the tax law. I have found two court cases stating sick time used while waiting for a disability retirement is not taxable but nothing yet to show a person who is just trying to recover and get back to work.

Re: Sick pay to supplement a workers' compensation injury, taxable or not?

NCperson — Tue, 26 Sep 2023 16:49:59 GMT

@BigBillyBob - see page 18. bottom left

https://www.irs.gov/pub/irs-pdf/p525.pdf

"In most cases, you must report as income any amount you receive for personal injury or sickness through an accident or health plan that is paid for by your employer. If both you and your employer pay for the plan, only the amount you receive that is due to your employer's payments is reported as income".

While the payments you are receiving are part of the benefit package and not necessarily from an accident or health plan, I think the same logic can be applied. Since the payments are coming from the employer, the income is taxable. I assume you are not paying for these "time off benefits" (vacation, sick leave, PTO, etc.)

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Sick pay to supplement a workers' compensation injury, taxable or not?

Re: Sick pay to supplement a workers' compensation injury, taxable or not?