It depends on the type of disability payment received. Disability paid by an insurance company for things like lost wages, loss of limb, or loss of sight may or may not be taxable, depending on circumstance:
- If the premiums were paid by your employer and weren't included in your taxable income, the disability is taxable
- If you paid the premiums out of your own pocket or with payroll deductions that came out of your after-tax income, the disability isn't taxable
- If you and your employer jointly paid the premiums, only the disability amount covered by your employer's payments are taxable.
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