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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 29941
Experience:  Taxes, Immigration, Labor Relations
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I have been receiving monthly disability payments from the

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I have been receiving monthly disability payments from the Unum company which I know is tax free. They have offered to buy out the remainder of my claim with a lump sum. Is that lump sum also tax free?

Lev :

Hi and welcome to our site!
If the monthly payments were not taxable the lump sum to settle your future payments will also not be taxable.

Customer:

Thank you Lev!

Lev :

If you pay the entire cost of a health or accident insurance plan, do not include any amounts you receive for your disability as income on your tax return.

Lev :

The same rule applies for periodic payments and for the lump sum payment to compromise these periodic payments.

Customer:

Yes, that is what I have done that last two years but wanted to make sure that taking a lump sum didn't change the whole law. Thank you!

Lev :

That is correct - the character of benefits - periodic payments or the lump sum payment - doesn't affect the tax treatment of benefits.

Lev and 3 other Tax Specialists are ready to help you