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Frequently Asked Tax Questions

Interest/Dividends/Other Types of Income - Life Insurance & Disability Insurance Proceeds


Rev. date: 1/2010


Are proceeds paid under a life insurance contract taxable and do they have to be reported as income?

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previous topic occurrence Insurance next topic occurrence
Insurance Proceeds
Life Insurance
previous topic occurrence Life Insurance Proceeds next topic occurrence
previous topic occurrence Taxable and Nontaxable Income next topic occurrence

Generally, if you receive the proceeds under a life insurance contract because of the death of the insured person, the benefits are not includable in gross income and do not have to be reported:

Rev. date: 1/2010


I am receiving long-term disability. Is it considered taxable?

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previous topic occurrence Disability Income next topic occurrence
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You must report as income any amount you receive for your disability through an accident or health insurance plan paid for by your employer:
Amounts you receive from your employer while you are sick or injured are part of your salary or wages.
Payments you receive from qualified long-term care insurance contracts will generally be excluded from income as reimbursement of medical expenses received for personal injury or sickness under an accident and health insurance contract. Also, certain payments received under a life insurance contract on the life of a terminally or chronically ill individual (accelerated death benefits) can be excluded from income. Refer to Publication 907, Tax Highlights for Persons with Disabilities.
You may be able to deduct your out-of-pocket expenses for medical care above any reimbursements, if you are eligible to itemize your deductions. You will need to review Publication 502, Medical and Dental Expenses.
For more information, refer to Publication 907, Tax Highlights for Persons with Disabilities.