Are Disability Benefits Subject To Tax?

You may wonder if the reduced income you receive on disability will be taxed by the government. It really depends on who paid the premium and how.

Taxable Disability Benefits

• Employer pays all of the premium and did not include that amount as part of your gross salary
• Employer pays disability income directly to you

Tax-Exempt Disability Benefits

• Employee pays premiums with after-tax income
• Employer includes the amount of the premiums as part of your income

Disability insurance is a great way to replace income lost when you become too ill or injured to do your job. To obtain multiple quotes from disability insurance companies in your area, please fill out the InsuranceBureau questionnaire.

Sources

1. I Receive Disability Insurance Payments, Are They Taxable? Retrieved April 29, 2008, from http://www.360financialliteracy.org/Financial+Topics/Tax+Planning/FAQs/Taxes+and+insurance+proceeds/I+receive+disability+insurance+payments.+Are+they+taxable.htm