Tax season is now upon us, and I always get more questions about No Fault benefits and whether they’re taxed. Today, I’d like to share a question regarding No Fault wage loss and its effect on filing income taxes:
Q. I understand that No Fault wage loss benefits are “pre-taxed” by only giving 85%. Does this mean my wage loss will not be taxed when I file my income taxes?
A. Yes, the reason your No Fault wage loss benefits are paid at 85% of gross is because they are tax free by law. This means they will not be taxed again when you file your income taxes.
Here’s the obligatory legal disclaimer: This answer is only correct as of the date of this blog post. The Michigan No Fault law or the tax code may change, so we recommend if you are reading this blog post in the future, that you confirm this with an experienced auto accident attorney. You can also call one of our auto accident attorneys and we would be happy to help you.
Here’s some good info about No Fault wage loss (also called work loss or lost wages):
Wage loss is a Michigan No Fault insurance benefit that compensates you for your wages that are lost when you’re injured in a motor vehicle accident and unable to return to work. It’s paid by your own No-Fault insurance company. A person can recover work loss/wage loss for up to the three years after the date of a car accident.
If you’re injured in an automobile accident between October 1, 2014 and September 30, 2015, your maximum wage loss benefits are $5,392 per month under No Fault policies. Here’s more about your wage loss benefits in Michigan.