Which Disability Income Is Taxable?
Knowing which types of disability income are taxable and how the taxable amount is computed can spare the recipient some unpleasant surprises at tax time.
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Payment Types
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Benefits are not taxable if the insurance premiums were paid entirely by the insured person. If the premiums were paid by an employer, benefit payments will be taxable to the recipient, or partially taxable if both employer and employee contributed to the premiums.
Exceptions
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Insurance premiums paid with pre-tax dollars are considered employer-paid, and benefits are therefore taxable.
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Social Security Disability
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If half of the Social Security income plus all other income exceeds the current IRS base amount for your filing status, part of your Social Security will be taxable.
Military and Government Disability
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Combat-related and certain pre-1975 government service disability pay is excluded from taxable income.
Children
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Children's disability payments, whether received as a result of the child's own disability or the disability of a parent, are generally not taxable.
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