Is an individual disability policy tax free?

Answer by  Geez (224)

If disability payments come from Social Security or disability insurance policy, it is necessary to file and there can still be a chance that people who receive disability benefits may owe income taxes. Policies are designed to average your tax-free income to around 45-60%, should the disability prevent you from earning an income.

Answer by  Manda (1103)

No, if you have disability insurance from a private company, this is counted as income. Unless your disability comes from Social Security in which case, it is not (unless your household income is greater than 40k).

Answer by  johnresa (2455)

Yes and no. Some policies are tax free and some are not. It all depends on what type of benefit plan you have. You could find out specifics on your policy by talking to a tax professional.