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I've settled out-of-court for a long-term disability claim. The LTD policy premiums were paid with after-tax dollars. Is the out-of-court settlement taxable?
I became disabled and unable to work, and the insurance company paid benefits before eventually terminating benefits. We took them to court, and they settled before the case went to trial.
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I've settled out-of-court for a long-term disability claim. The LTD policy premiums were paid with after-tax dollars. Is the out-of-court settlement taxable?
Long-term disability benefits are not taxable when the insurance premiums are paid with after-tax dollars. As the settlement is considered as your long-term disability benefits, it is not taxable. And any legal fees you incurred are not deductible.
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I've settled out-of-court for a long-term disability claim. The LTD policy premiums were paid with after-tax dollars. Is the out-of-court settlement taxable?
Long-term disability benefits are not taxable when the insurance premiums are paid with after-tax dollars. As the settlement is considered as your long-term disability benefits, it is not taxable. And any legal fees you incurred are not deductible.
**Mark the post that answers your question by clicking on "Mark as Best Answer"
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I've settled out-of-court for a long-term disability claim. The LTD policy premiums were paid with after-tax dollars. Is the out-of-court settlement taxable?
I have the same situation. My premiums were paid entirely by me with post tax dollars. However, just to verify that I won’t owe tax on the out-of-court settlement, I’d like to find this same info on the IRS website. Can someone point me to this? I’ve looked high and low. Thanks.
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I've settled out-of-court for a long-term disability claim. The LTD policy premiums were paid with after-tax dollars. Is the out-of-court settlement taxable?
See pages 17-19, "Sickness and Injury Benefits", in this IRS reference: https://www.irs.gov/pub/irs-pdf/p525.pdf