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Frequently Asked Tax Questions

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

  1. Are proceeds paid under a life insurance contract taxable and do I report this as income?
  2. Is the long-term disability I am receiving considered taxable?

Rev. date: 12/18/2014

Are proceeds paid under a life insurance contract taxable and do I report this as income?


Rev. date: 12/18/2014

Is the long-term disability I am receiving considered taxable?

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.
You can generally exclude from income payments you receive from qualified long-term care insurance contracts as reimbursement of medical expenses received for personal injury or sickness under an accident and health insurance contract. Also, you can exclude from income certain payments received under a life insurance contract on the life of a terminally or chronically ill individual (accelerated death benefits). 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