It depends on the disability policy and what type of funds (pre-tax or after-tax) were used to pay the premiums. If it was a group policy that was paid for by an employer or by pre-tax payroll deduction, then the benefits are taxable. If, on the other hand, the policy was an "individual" policy purchased by you (or a group policy) and the premiums were paid for with after tax funds, then the benefits would not be subject to federal income tax.
