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Are My LTD Benefits Taxable?

We often get asked about the tax consequence on disability insurance benefits. The first thing we always tell clients is that we are not tax attorneys or accountants. We advise they should always speak to a tax professional for any advice regarding taxes.

As disability insurance lawyers, what we have seen when it comes to the taxability of LTD benefits, is that it depends on how the premiums were paid. There are essentially two situations that affect taxability:

  • Premiums paid with pre-tax dollars
  • Premiums paid with post-tax dollars

Most disability insurance policies are group policies provided as part of an employee benefit package. In those instances, more often than not, the premiums are paid with pre-tax dollars. That means taxes have not yet been taken out of the money used to pay the premium. In that case, the LTD benefits are taxed. Conversely, when the premiums are paid with post-tax dollars, the benefits are typically not taxed.

If you are a professional who took out an individual disability insurance policy, more than likely you paid your premiums with income after taxes have been taken,paying it like a normal monthly bill. So, most individual LTD benefits are not taxed.

When planning for your future, while filing for a disability insurance claim or fighting a denied claim, it is important to keep in mind any potential tax consequences. This also carries over into any settlement during litigation or buy-out while on claim. Essentially, any money you receive as disability insurance benefits may be taxed. Thus, it is important to plan accordingly.

Our Lawyers Specialize in Disability Insurance Claims

Because our law firm has always focused only on disability insurance, our lawyers are experts in legal representation for disability insurance benefits.

That means our disability lawyers have:

Because federal law applies to most disability insurance claims, we can help clients across the country.

Disability insurance companies have lawyers. You should too. Call Dabdoub Law Firm to get experienced disability lawyers on your side.

We can help with:

Call for a free consultation with a disability attorney. No fees or costs until you get paid.