I’m retired, and my income is from a pension and Social Security, from which I take standard deductions for federal income tax. My wife draws workers compensation as her only source of income. Is the workers compensation income tax free? – H.T.
According to IRS Publication 17, “amounts you receive as workers’ compensation for an occupational sickness or injury are fully exempt from tax if they are paid under a workers’ compensation act.” We suggest looking into your favorite tax program to determine how your return will look considering the new situation. If you do that, you’ll have a clear idea of any adjustments that may need to be made to avoid any surprises next April.