Insurance Broker Discusses Taxation of Disability Benefits
As an experienced Insurance Broker, I often get questions from clients about disability benefits taxation. A common question we get is when you’re receiving disability benefits and income, is that taxable or not taxable to me and my family? Well, it all depends on one big thing. When the premium is paid, is it paid before tax or with after tax dollars. If it’s paid with pretax dollars, and in most cases that’s group insurance plans, social security plans, or things of that nature, you will pay taxes on that. Think of it as if somebody’s taking a deduction for paying for that premium, you will be taxed on that benefit.
Individual plans are usually paid with after tax dollars so the money comes to you, gets taxed by the government and then you pay the premium. In that case, when you file a claim and get paid the income, you will not have to pay taxes on that. One thing to know though, is there are a lot of cases where you will not receive a 10-99 like you’re used to or a W-2 at the end of the year. Make sure you consult with your tax advisor on that issue because sometimes you’ll get an annual statement and you have to determine which are after tax and pretax dollars.
If you have questions about taxation of your disability benefits, contact our professional Insurance Broker for guidance. Let our knowledge work for you.