Common Tax Considerations of Long Term Disability Insurance Programs

The tax considerations of long term disability insurance programs can easily become convoluted and confusing. The best and most profitable advice is to consult with your trusted tax advisor before you make any decisions that may affect your personal tax situation. Having said that, here are some basic issues affecting your income tax requirements.

• Who is paying the premiums on your long term disability coverage? Taxability normally is determined by who is paying the premiums for your coverage. If your employer is paying premiums, your monthly income benefits are typically taxable. If you are the owner of coverage and paying monthly premiums, generally your monthly income benefits are tax free.
• Receipt of Social Security Disability Insurance (SSDI) benefits in addition to private insurance benefits. SSDI benefits are often tax free but this tax exclusion can depend on the level of your “other income”, as determined by Social Security.
• Are your long term disability benefits being paid in conjunction with some workers compensation income? Depending on the language of your policy, the taxability of your benefits may be affected.
• Are you receiving veterans or military disability income? Taxability often depends on a mixture of federal regulations and private insurance language.

Because of the myriad of potential tax considerations of long term disability premiums and income, always consult with your tax advisor before making major decisions or choices. Also, use effective websites, like ProtectYourIncome.com, to get more information about the best available choices. Refer to your insurance policy contract for specific information regarding your coverage and for actual terms, conditions and exclusions. The above statements are general in nature and may or may not reflect the actual terms of your insurance policy.