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It's natural to think about the long-term implications when starting a new payment plan for anything, including insurance. Wondering if taxes are taken out of short-term disability is a valid concern. The main tax implication your plan has a possibility of facing is a tax on the short-term disability benefit, or cash payout. This benefit may also be called short-term disability income.
As a supplemental insurance company, Aflac knows that creating an affordable and sustainable roadmap for your health and wellness is essential. Before diving into the details of whether you pay taxes on short-term disability insurance benefits, let’s discuss how short-term disability insurance works. Then, we'll discuss when short-term disability income may be taxable.
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Let’s say Ashley cooks herself a meal after work and severely burns her hand on a pan. She visits the doctor and discovers that the burn will take a month to heal. She works with her hands, so she will need to take time off work while she recovers.
Thankfully, Ashley purchased a short-term disability plan ahead of time through her employer so she could access benefits. Short-term disability insurance is designed to help you recover from an injury or illness that temporarily puts you out of work.1
At this point, she finds herself wondering if she pays taxes on short-term disability. The answer depends on how she structured her short-term disability premium payments.
A few different instances determine if short-term disability payments are taxable or not:
Don’t wait until it’s too late. Help cover yourself and your family with coverage from Aflac.
Get StartedAflac Short-Term Disability Insurance is only offered through employee payroll. If your employer does offer short-term disability, it may be wise to help protect your income from the unexpected. You never know when a debilitating situation will arise. It can be helpful to have a short-term disability plan in place that helps you recover financially and physically while you are unable to work.
If you are an employer, offering short-term disability insurance and clearly communicating tax implications can help employees feel peace of mind. If you find your employees wondering if short-term disability income is taxable, sharing this article can be a helpful resource.
If you’re an employee and your employer does offer short-term disability insurance, it can be helpful to discuss the payment structure, so you’ll know if you’ll get taxed on short-term disability. If you are an employee and your employer doesn’t currently offer short-term disability insurance, it’s never too late to start the conversation.
Get Started
Short-term health insurance can give you temporary coverage. Learn how short-term health insurance works, how much it costs, and how to choose the right plan.
Short-term disability insurance can help protect your income if you’re unable to work. Learn how short-term disability works and what it covers.
Short-term health insurance can give you temporary coverage. Learn how short-term health insurance works, how much it costs, and how to choose the right plan.
Short-term disability insurance can help protect your income if you’re unable to work. Learn how short-term disability works and what it covers.
1 The Balance - Is Short-Term Disability Taxable? Updated July 3, 2024. Accessed February 19,2025. https://www.thebalance.com/is-short-term-disability-taxable-5184583.
Coverage is underwritten by American Family Life Assurance Company of Columbus. In New York, coverage is underwritten by American Family Life Assurance Company of New York.
In Delaware, Policies A57600DE & A57600LB. In Idaho, Policy A57600IDR. In Oklahoma, Policies A57600OK & A57600LBOK. In Virginia, Policies A57600VA & A57600LBVA.
Content within this article is provided for general informational purposes and is not provided as tax, legal, health, or financial advice for any person or for any specific situation. Employers, employees, and other individuals should contact their own advisers about their situations. For complete details, including availability and costs of Aflac insurance, please contact your local Aflac agent.
Coverage may not be available in all states, including but not limited to DE, ID, NJ, NM, NY, VA or VT. Benefits/premium rates may vary based on state and plan levels. Optional riders may be available at an additional cost. Policies and riders may also contain a waiting period. Refer to the exact policy and rider forms for benefit details, definitions, limitations and exclusions.
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