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I am currently on longterm disability from my company. I…

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Hi I am currently on longterm disability from my company. I need to know if this is taxable income. I'm being told that since I paid into the insurance I do not have to pay taxes on the amount I received.

Accountant's Assistant: The Accountant will know how to help. Is there anything else important you think the Accountant should know?

The premium amount was after taxes on my pay stub. But my benefits administrator is saying that taxes are owed. The question is if I did not have to pay it on the short term portion why does it need to be paid on the long term.

Submitted: 4 months ago.Category: Tax
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11/27/2017
Tax Professional: Tax.appeal.168, Tax Accountant replied 4 months ago
Tax.appeal.168
Tax.appeal.168, Tax Accountant
Category: Tax
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Tax Professional: Tax.appeal.168, Tax Accountant replied 4 months ago

If you paid for the disability insurance with after-tax dollars, the disability is not taxable income. SEE BELOW:

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The rules surrounding taxation of individual disability income insurance benefits are generally simple. Because you pay the premiums with after-tax dollars, the benefits you receive are tax free. However, unlike health insurance premiums, you can't deduct premiums paid for individual disability income insurance as a medical expense.

REFERENCE SOURCE:

https://www.ameriprise.com/research-market-insights/tax-center/tax-planning/taxation-of-disability-insurance/

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Tax Professional: Tax.appeal.168, Tax Accountant replied 4 months ago

Additional Info:

---------------------------------

Employer-sponsored group disability insurance

If you are enrolled in a group disability insurance plan sponsored by your employer, the taxability of your benefits depends on who pays the premium. If you pay the total premium using after-tax income, then your benefits will be tax free. On the other hand, if your employer pays the total premium and does not include the cost of coverage in your gross income, then your benefits will be taxable.

If your employer pays part of the insurance premium and you pay the rest, then your tax liability will be split as well. The part of the benefit you receive that is related to the employer-paid share of the premium is taxable; any part of the benefit related to your share of the premium is tax free.

If you pay part of the premium for employer-sponsored disability coverage, the type of dollars you use to pay the premium determines whether your benefit will be taxable. If you pay your part of the premium with pretax dollars, through a cafeteria or medical reimbursement plan, you'll owe income tax on any disability benefit you receive that is related to that part of the premium. On the other hand, if you pay your part of the premium with after-tax dollars, you won't owe income tax on any disability benefit you receive that is related to that part of the premium.

You can refer to the reference source link provided in my previous response for more detailed information.

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