Los Angeles Area Disability Claims Insurance Attorneys - We Created the Law of Insurance Bad Faith


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Consumer SSI Disability Insurance Legal Resources - Los Angeles, Beverly Hills, Claremont, San Bernardino, California Attorneys
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Los Angeles County California SSI Lawyers • SSD Attorneys • Beverly Hills • Claremont • Los Angeles & Southern California Disability Insurance Law Firm

Is income from disability benefits taxable income?
Payments from Social Security Disability (SSD) benefits are considered taxable income.
  

Are benefits from short-term and long-term disability payments taxable income?

Whether or not you will be required to pay taxes on disability income depends on several things including your total income (or total combined income if you file a joint return with a spouse), and whether or not you, or your employer took a tax deduction for disability insurance premiums.

 

Do I have to pay taxes on income from Social Security Disability payments?

Payments from Social Security Disability (SSD) benefits are considered taxable income.  However, because total income is limited for recipients of Supplemental Security Income (SSI), who may also need to meet income requirements to qualify for SSD, most people on SSD will not owe taxes on disability income.  If your total income (or combined income if filing a joint return) exceeds government set thresholds, you may need to pay taxes on SSD income.

I deducted insurance premiums from my taxes. Do I have to pay taxes on my disability benefits now?


Yes. Unless you have paid disability insurance premiums for three consecutive tax years, in most cases, your benefits will be considered taxable income.

In general, if you purchase your own disability insurance and do not write off the cost of premiums on your tax return, then any benefits you receive from the insurance proceeds are not taxable income.


My employer pays my insurance premiums for me. Is income I receive from short-term or long-term disability considered taxable income?


Yes. An employer can deduct the cost of paying short-term and long-term disability premiums for employees if the insurance is offered at no cost to employees as a benefit. 

If your employer deducts the cost of your premiums as a business expense, any disability benefits you receive are considered fully taxable income and you are solely responsible for paying any income tax due.

More Insurance and Legal FAQs:

Disability Insurance Tax Tips

Three-Year Look Back and Limitations on Taxable Disability Income


Group policies lack the tax advantages of individual policies: If you pay the individual disability policy premiums yourself, your disability benefits will be tax-free, whereas group benefits are taxable because your employer is paying your premium.

Buy as much coverage as you can afford. Always buy as much individual disability insurance as your income will support. If your employer offers group disability insurance, apply for the individual coverage before you put the group coverage in place as this will allow you to maximize your non-taxable benefits and preserve all of your state’s consumer remedies.

If you already have employer sponsored group coverage, apply for as much individual coverage as possible and be sure to include a future increase option to protect you in the event you leave your employer and the group coverage terminates.