Is long-term disability benefit considered to be taxable income? My wife has cancer and received benefits in 2023.

Forum|Forum|2 years ago
February 26, 2024
2 replies
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The only deduction made to her checks was for social security. I feel like it's taxable income but am looking for confirmation.

TurboTax Online

Best answer by DawnC

If her employer paid the premiums, yes, it is taxable.

Disability paid by an insurance company for things like lost wages, loss of limb, or loss of sight may or may not be taxable, depending on circumstance:

If the premiums were paid by your employer and weren't included in your taxable income, the disability is taxable.
If you paid the premiums out of your own pocket or with payroll deductions that came out of your after-tax income, the disability isn't taxable.
If you and your employer jointly paid the premiums, only the disability amount covered by your employer's payments are taxable.

Is disability income taxable?

DawnCAnswer

Employee

If her employer paid the premiums, yes, it is taxable.

Disability paid by an insurance company for things like lost wages, loss of limb, or loss of sight may or may not be taxable, depending on circumstance:

If the premiums were paid by your employer and weren't included in your taxable income, the disability is taxable.
If you paid the premiums out of your own pocket or with payroll deductions that came out of your after-tax income, the disability isn't taxable.
If you and your employer jointly paid the premiums, only the disability amount covered by your employer's payments are taxable.

Is disability income taxable?

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Opus 17

Employee

That depends on how the policy premiums were paid. If you bought a private policy and paid the premiums after-tax, then the benefit is not taxable. If the policy was furnished by her employer, and either the employer paid the premiums as a tax-free benefit, or she paid the premiums as a pre-tax deduction (or a combination of both) then the benefit is taxable income, and should be reported on a W-2, either from the employer or from the LTD company. (They might or might not withhold income taxes, but the income is taxable if it is on a W-2. If no income taxes were withheld, you might be underpaid and owe a big bill and penalty.)