Disability insurance benefits are supposed to be tax free if you (the individual) had paid the premiums for that policy with your own after-tax dollars. You should consult your own legal or tax advisor in your resident state for full clarity to this question, since I am neither an attorney or an accountant.
If you pay your disability insurance premium with money that you paid income taxes on, your disability benefit should be tax free. It is a big advantage to receive disability benefits tax free, because becoming disabled brings with it extra expenses and challenges. While disability benefits are not 100% of what prior income was, not having to take out taxes could make them equivalent (or even higher) than your take home pay previously was.
Agent Owner, Gilmore Insurance Services, Marysville, Washington State
Is disability insurance payments considered tax free? It will depend on how you paid your premiums. If you used after tax dollars for the premium then no, your benefit would not be considered taxable income. If you depending on your situation were able to write off or use pre-tax dollars for premiums then, yes your benefit would be taxable.
In Canada, if you personally pay the premium of an individual or group disability insurance then the benefit is tax free. If the company pays the premiums then the disability benefit would be taxable.
In some corporate situations it is possible to structure individual policies so that the company deducts the premium and it is not considered a taxable benefit to the employee. However, if the employee is disabled the benefit are taxable. To offset the disability benefit being the amount you are allowed to qualify for based on your income is increased.
If you have further questions, or feel that I could be of assistance, please do not hesitate to contact me.
If you would like to work with a local life insurance broker, you could start with a Google search. For example, if you search for: life insurance broker Halifax or life insurance agent Halifax, my name, along with several others, will come up. You can use the same method to find a life insurance broker in your community.
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In some corporate situations it is possible to structure individual policies so that the company deducts the premium and it is not considered a taxable benefit to the employee. However, if the employee is disabled the benefit are taxable. To offset the disability benefit being the amount you are allowed to qualify for based on your income is increased.
If you have further questions, or feel that I could be of assistance, please do not hesitate to contact me.
If you would like to work with a local life insurance broker, you could start with a Google search. For example, if you search for: life insurance broker Halifax or life insurance agent Halifax, my name, along with several others, will come up. You can use the same method to find a life insurance broker in your community.