Injured-on-duty pay is exempt from which taxes?

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Multiple Choice

Injured-on-duty pay is exempt from which taxes?

Injured-on-duty pay, or workers’ compensation, is treated as a benefit that replaces lost wages due to a job-related injury. For federal taxes, these benefits are excluded from gross income, so they aren’t subject to federal income tax. States generally follow the federal treatment, so most states also don’t tax workers’ compensation benefits. That combination means this type of pay is exempt from both federal and state taxes in most cases, which is why the best answer is that it is not taxed at either level.

Injured-on-duty pay, or workers’ compensation, is treated as a benefit that replaces lost wages due to a job-related injury. For federal taxes, these benefits are excluded from gross income, so they aren’t subject to federal income tax. States generally follow the federal treatment, so most states also don’t tax workers’ compensation benefits. That combination means this type of pay is exempt from both federal and state taxes in most cases, which is why the best answer is that it is not taxed at either level.

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