Disability buyout insurance proceeds are generally considered taxable income by the IRS. This means that the amount you receive from the insurance company due to a disability may be subject to income tax. However, there are some exceptions and specific circumstances that may affect the taxability of these proceeds. It is important to consult with a tax professional or financial advisor to determine the exact tax implications in your specific situation. Additionally, some states may have different tax rules, so it's essential to be aware of your local tax laws.