South Carolina workers’ compensation benefits are generally exempt from taxes. When you’re hurt on the job, workers’ comp insurance provides no-fault coverage of your:
- Medical expenses
- Lost wages
- Vocational re-training
- Death benefit
If your workers’ comp claim is accepted by your employer’s insurance company, you could receive benefits weekly or in a lump sum. In either case, workers’ comp should cover all medical bills and two-thirds of your average salary for the time that you can’t work, and your benefits are exempt from state and federal taxes.
If you return to work on light duty at a salary lower than your previous one, workers’ comp will still make up two-thirds of the difference between your previous and current salaries. There will be no tax deductions from that balancing payment, but your new, lower salary itself will be taxed as usual.
Workers’ Comp and SSDI Offset
In some cases, employees receiving workers’ comp benefits might also be eligible for Social Security Disability Insurance (SSDI). If you receive both, your workers’ comp payments are still tax-exempt for the most part. The total amount of money you receive monthly from these two sources, however, can’t be more than 80% of your average full-time salary.
If your combined monthly benefits are too high, Social Security can reduce your SSDI payments to keep your total income below that 80% threshold. This reduction is called an offset. Whatever the amount of your SSDI offset, that same amount of your workers’ comp benefits then becomes taxable. For example:
- Your monthly SSDI payment is reduced by $200 to keep you below the 80% total income threshold.
- $200 of your monthly workers’ comp benefits then becomes taxable.
- If you receive workers’ comp benefits in a lump sum payment, Social Security will prorate the amount to determine your monthly workers’ comp income and use that number to calculate your total monthly income.
If, however, your total income (workers’ comp and SSDI) is below the threshold for any Federal taxation, the guidelines above won’t apply to you. If you receive regular Social Security retirement benefits, they won’t be offset as SSDI is. Because the rules and guidelines for an SSDI offset are specific and complex, you’re well-advised to consult a workers’ comp lawyer if you receive both types of benefits. Your attorney will know how to:
- Structure your workers’ comp award to minimize your offset and reduce taxation.
- Inform Social Security of expenses coming out of your workers’ comp benefits and thus reducing your total income before the 80% threshold is calculated.
A claimant who doesn’t receive SSDI and workers’ comp benefits at the same time might be able to handle a simple workers’ comp claim without a lawyer if:
- Their injuries aren’t serious and their medical expenses are low.
- There’s little or no time off work.
- The employer’s insurer doesn’t dispute the claim.
If, on the other hand, your injuries are serious, your bills high, and your recovery long, your claim could be an expensive one for the insurance company. They might try to deny you benefits by claiming your injury is:
- Not work-related
- Caused by a pre-existing condition
- Not as serious as you say it is
Although you have the right to appeal their decision to the South Carolina Workers’ Compensation Commission (SCWCC) and even to the SC Court of Appeals and Supreme Court, the insurer’s lawyers are experts in workers’ comp law. They know that:
- You’re recovering from injuries and possibly on strong medication.
- You don’t have the knowledge or negotiation skills that they have.
- You have very little chance of appealing successfully without an attorney.
If you do have an attorney, the insurer will take you much more seriously and put a better offer on the table rather than risk the expense of a lengthy appeals process. For this reason, you’re much more likely to get fair weekly benefits or an adequate lump-sum payment with a lawyer than without one.
Have You Been Injured On The Job?
If you've been hurt at your job you can speak with a workers' compensation lawyer. Please contact us online or call our Charleston, South Carolina office directly at 843.488.2359 to schedule your consultation. We are also able to meet clients at our Conway, Myrtle Beach, Murrells Inlet, Mt. Pleasant, North Myrtle Beach or North Charleston office locations.