Is Workers’ Compensation Taxable in South Carolina?
In South Carolina, workers’ compensation offers essential financial support for employees who have been injured on the job. If you are a recipient of these benefits, it’s important to understand the tax status of all your sources of income.
So, is worker’s compensation taxable in SC?
The short answer is no, but there are a few exceptions.
In this blog, we’ll clarify the tax rules for workers’ compensation in SC. These rules are key for anyone navigating the workers’ compensation system to ensure eligibility and maximize the benefits received.
Understanding SC’s Workers’ Compensation Laws
Both Federal and South Carolina law exempt workers’ compensation benefits from taxation in almost every situation. However, there can be an exception for a recipient who also receive Social Security Disability Insurance (SSDI) benefits. For recipients of both workers’ compensation and SSDI benefits, certain conditions may render a portion of workers’ compensation benefits taxable.
Who Can Receive Workers’ Compensation in South Carolina?
To get workers’ compensation in South Carolina, you must meet specific criteria. Here’s what qualifies you:
- Employment status: You must be an employee of a company or organization that is reuired to carry workers’ compensation insurance. South Carolina requires most employers to maintain this coverage for their employees. Unfortunately, independent contractors usually don’t qualify.
- Cause of injury: Your injury or illness must be related to your job duties or workplace. This covers injuries from work tasks or illnesses caused by the work environment.
- Reporting timeline: You must report any injuries or illnesses to your employer within 90 days. Failure to do so in time could affect your eligibility.
- Filing with SCWCC: Finally, you must file your claim with the South Carolina Workers’ Compensation Commission. This body checks the validity of claims and decides on the benefits.
Understanding these points is key to navigating the system and ensuring you get the benefits you deserve after a work-related injury or illness.
Do You Pay Taxes on Worker’s Compensation?
In SC, workers’ compensation benefits are tax-exempt in nearly all circumstances. This exemption benefits employees who suffer injuries or disabilities on the job. One notable exception concerns workers’ compensation recipients who also receive Social Security Disability benefits.
If you receive both workers’ compensation and SSDI benefits, and the combined income from these sources exceeds 80% of your pre-disability earnings, a tax offset occurs. The offset reduces the SSDI benefits but makes an equivalent portion of the workers’ compensation benefits taxable. For example, if the SSDI payments are reduced by $200 to maintain an income threshold, $200 of the workers’ compensation benefits would then be taxable.
Additionally, when workers’ compensation recipients receive their benefits in a lump sum, Social Security calculates a monthly equivalent to determine if the total monthly income exceeds the 80% threshold, altering the tax status of benefits. This system ensures the state consistently applies the same tax liabilities, even when federal benefit programs overlap. However, there are ways to legally reduce this offset.
Managing Workers’ Compensation Claims and Taxes in South Carolina
Handling workers’ compensation claims in SC requires attention to potential tax implications, especially for those also receiving SSDI benefits. Here’s what you should do:
- Document your injuries and report them immediately to ensure eligibility.
- Consult with a legal professional experienced in workers’ compensation law to navigate the claims process effectively.
- Seek advice from a tax advisor who can provide clarity on potential tax liabilities and help maximize the benefits received. (Note that Williams & Kamb does not practice tax law, and you should always consult a tax professional concerning tax issues.)
This approach ensures you are well-prepared to manage both their compensation claims and any ensuing tax obligations.
Consult with a Worker’s Compensation Attorney in SC Today
If you’ve been injured on the job, you need expert legal advice to secure the benefits you deserve. Contact us today at Williams & Kamb for guidance through the complexities of workers’ compensation claims. Our experienced team is here to provide the clarity and support you need.