+71 votes
Is the income received from disability insurance considered taxable income? I am curious to know if the income I receive from disability insurance is considered taxable by the government.
by (420 points)

1 Answer

+46 votes
Best answer
The taxability of disability insurance income depends on the type of policy you have and your specific circumstances. Generally, there are two types of disability insurance policies: short-term and long-term. Short-term disability insurance typically covers a portion of your income for a limited period, usually three to six months, while long-term disability insurance provides coverage for a more extended period, often until you reach retirement age or are able to return to work.

For short-term disability insurance, the benefits you receive are generally considered taxable income, and you will need to report them on your tax return. This is because short-term disability insurance premiums are typically paid with pre-tax dollars, so the benefits you receive are considered taxable.

On the other hand, long-term disability insurance benefits are generally not considered taxable income. This is because long-term disability insurance premiums are usually paid with after-tax dollars. However, if your employer pays the premiums for your long-term disability insurance, the benefits you receive may be considered taxable income.

It's important to note that the taxability of disability insurance income can vary depending on your specific situation and the terms of your policy. You should consult with a tax professional or financial advisor to determine the tax implications of your disability insurance policy. Additionally, you should review your policy documents to understand the specific terms and conditions that apply to your situation.
by (460 points)
selected by