Generally, you must pay taxes on long-term disability payments from an employer-paid accident or health insurance plan. in other words, if the employer got the tax deduction for the premiums - either paid them as a non-taxable fringe benefit or you paid them thru a payroll deduction but had your taxable wages reduced its taxable. on the other hand, a payroll deduction where you got no reduction in your taxable wages, or the amount was paid by the employer but added to your taxable wages then it's tax free (. ask your employer to make sure. where the employer paid part and you paid part for which you got no tax-benefit only the employer part is taxable.