For tax purposes, long-term disability benefits may be considered income, and therefore, are subject to taxation but it depends on the nature of the benefits and how they were paid. Certain types of disability payments may also be considered income if a recipient wishes to apply for other types of benefits, such as social assistance.
Situations Involving Taxable Long-Term Disability Payments
Depending on your circumstances, you may or may not be required to pay tax on your long-term disability benefits payments. Generally speaking, if your employer pays the premiums, your benefits may be considered taxable income. If you pay your own premiums or a portion thereof, you may not be required to pay tax on your benefits since you have already paid taxes on the incomes used to pay those premiums.
To determine if your long-term disability benefits will be considered income under the Income Tax Act, you may be able to inquire with a representative from your insurance provider. Insurance providers are obligated to inform you if your benefits are taxable and provide you with appropriate documentation. They may also withhold a portion of your benefits payment for tax purposes.
How Eligibility for Other Benefit Programs May Be Affected
If you cannot work because of your medical condition and are concerned about how you’ll be able to support yourself or provide for your family, you may consider applying for social assistance. Without a stable source of income, you may qualify to receive income assistance.
However, some social assistance programs might consider long-term disability payments to be reportable income. An individual’s amount of personal income may affect their ability to qualify for social assistance programs. Applicants may be required to thoroughly examine the rules of different assistance programs to determine if their long-term disability benefits might prohibit them from seeking additional assistance.
How Canada Pension Plan Disability Benefits May Help
Long-term disability benefits recipients may be able to receive additional income through Canada Pension Plan Disability Benefits. These benefits may also be subject to income tax.
Although long-term disability benefits may not affect your ability to collect benefits from the Canada Pension Plan, receiving them may reduce the amount of long-term disability payments your insurance company may provide. This may happen when your insurance policy includes a clause allowing them to offset your disability payments based on other income you receive from other sources.
Speak to Preszler Injury Lawyers About Your Benefits
If you have questions about your long-term disability benefits, Preszler Injury Lawyers may be able to provide useful assistance or advice. If you believe your claim for benefits has been unfairly denied, Preszler Injury Lawyers may be able to review your policy and help you appeal an insurance company’s decision.
To discuss the legal options that may be available to you, call Preszler Injury Lawyers at 1-800-JUSTICE for a free, initial consultation.