What is the federal income tax treatment surrounding benefits received from a disability insurance policy?
The answer to this question depends on who paid the insurance premiums. If the insured paid the premiums with after-tax dollars, then the disability benefits should be received income tax-free. In contrast, if an employer paid part or all of the premiums then an equivalent portion of the benefits are generally taxable to the insured (in this instance, however, an income tax credit may be available to the insured). In any event, your tax adviser should be consulted with respect to the probable income tax treatment of any disability income coverage that you currently have or are contemplating purchasing.
The answer to this question depends on who paid the insurance premiums. If the insured paid the premiums with after-tax dollars, then the disability benefits should be received income tax-free. In contrast, if an employer paid part or all of the premiums then an equivalent portion of thntly have or are contemplating purchasing.
