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Is My Disability Income Taxable?

Updated: 11/20/2012

Article ID: GEN83666

Generally you report as income on your tax return any amount you receive

for personal injury or sickness
through an accident or health plan and
that is paid for by your employer

If both you and your employer pay for the plan, the percentage paid by your employer would be applied to the benefits and only that portion would be taxable to you.

If you paid the entire cost of an accident or health plan, the amounts you receive from the plan for personal injury or sickness are not reported as income on your tax return.

Is my workers compensation taxable?

Amounts you receive as workers' compensation for an occupational injury or sickness are not taxable if paid under a workers' compensation act or a statute in the nature of workers' compensation act.

If you return to work after qualifying for workers' compensation, salary payments you receive for performing light duties are taxable as wages.

I received disability benefits due to a car accident; is it taxable?

Disability benefits, which you receive for loss of income or earning capacity as a result of injuries under a no-fault insurance policy, are not taxable.

I retired due to a disability; is the income taxable?

If you retired due to a disability, you must include the disability pension that you receive under a plan that is paid for by your employer as income on your tax return.

You report your taxable disability payments as wages on line 7 of Form 1040 or Form 1040A until you reach minimum retirement age. The minimum retirement age is generally the age at which you can receive a pension if you are not disabled.

Beginning on the day after you reach minimum retirement age, payments you receive are taxable as a pension and reported on Form 1040, lines 16a and 16b or Form 1040A, line 12a and 12b.

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