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Do I Have to Report Long-Term Disability on My Taxes?

If you have subscribed to your employer’s group insurance plan, and have been required to collect long-term disability benefits due to a serious medical condition, you may be required to claim these benefits payments as income when filing your taxes. If your employer pays for your monthly insurance premiums, the benefits payments you receive could be considered taxable income, and therefore, must be reported as such.

Employees are required to pay taxes on all forms of compensation received from their employer. However, if an employer pays for insurance premiums to cover their staff under a group policy, despite the fact that these premiums represent a form of monetary compensation from their employer, these payments are not considered taxable benefits to the individual employees.

However, if an individual employee needs to claim the benefits of their long-term disability insurance policy since the employer paid the monthly cost of insurance premiums, the individual receiving the benefits payments must report them on their tax return.

How the Taxability of Long-Term Disability Is Determined

If your employer paid part of your insurance plan’s premiums and you paid the remainder out of your salary, when a medical condition requires you to claim long-term disability benefits, you may be required to report only a fraction of your benefits payments as income on your tax returns.

In most cases, when an insurance company determines if a policyholder is eligible to claim long-term disability benefits, they will also determine which percentage of your premiums were covered by your employer, and remove any required taxation amounts from your monthly payments before issuing them, as necessary.

When Long-Term Disability Is Not Considered Taxable Income

If you bore all the financial responsibility for your health and disability insurance coverage on your own, and your employer did not pay any percentage of your premiums, the Canada Revenue Agency will not require you to report your long-term disability benefits on your income tax return.

According to the Ontario Ministry of Finance, benefits paid by insurance companies under the terms of a contract are not subject to tax. Furthermore, if one of your family members is terminally ill, per the Financial Services Commission of Ontario (FSCO), you are not required to report any accelerated death benefit payments you may receive from their life insurance policy.

Reporting Disability Benefits from the Canada Pension Plans

If you are under the age of 65, have sustained a severe, prolonged medical condition preventing you from working, and have sufficiently contributed to the Canada Pension Plan (CPP), you may be eligible for CPP disability benefits. Recipients of these disability benefits may have to pay taxes on these payments, as well.

Call Preszler Injury Lawyers Today

If you’ve been diagnosed with a serious medical condition that prevents you from earning a regular income from your employer, navigating the complexities of the Income Tax Act may feel daunting. If you have questions about paying taxes on your long-term disability benefits payments, Preszler Injury Lawyers may be able to provide you with helpful assistance and advice. To discuss your situation, call Preszler Injury Lawyers today at 1-800-JUSTICE> for a free, initial consultation.

Call us now at

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M4R 1A6
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Ottawa ON
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