Question from an IIABNY member: If someone receives wage loss benefits under New York no-fault insurance, do they have to pay income tax on them?
Answer: According to the IRS Web site (look near the bottom of the page):
Other compensation. Many other amounts you receive as compensation for sickness or injury are not taxable. These include the following amounts.
- Compensatory damages you receive for physical injury or physical sickness, whether paid in a lump sum or in periodic payments.
- Benefits you receive under an accident or health insurance policy on which either you paid the premiums or your employer paid the premiums but you had to include them in your income.
- Disability benefits you receive for loss of income or earning capacity as a result of injuries under a no-fault car insurance policy. [EMPHASIS ADDED]