2.12 Sick Pay Is Taxable

Sick pay received from an employer is generally taxable as wages unless it qualifies as workers’ compensation (2.13). Payments received under accident or health plans are generally tax free (3.3), unless they constitute excess reimbursements (17.4). Payments from your employer’s plan for certain serious permanent injuries are tax free (3.3).

Disability pensions are discussed in 2.14.

Sick pay received from your employer is subject to income tax withholding as if it were wages. Sick pay from a third party such as an insurance company is not subject to withholdings unless you request it on Form W-4S.