2026 tax year
Is your short-term disability benefit taxable?
The answer depends on who paid the premium, not on how much you receive.
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Short-term disability replaces part of your pay for a few weeks or months, and whether it is taxed has nothing to do with the amount. It depends on who paid for the policy.
If your employer paid the premium, the benefit is fully taxable as ordinary income and you will get a W-2 for it. If you paid the premium yourself out of pay that had already been taxed, the benefit is entirely tax-free, you have already paid tax on the money that bought it. If the cost was shared, the benefit is split in the same proportion.
The trap is a premium deducted from your pay before tax. That feels like paying it yourself, but untaxed money bought the policy, so the benefit is taxable. Change the premium answer below and the difference is immediate.
Concretely: a policy replacing 60% of a $1,000 weekly wage pays $600 a week. Employer-paid, at a 22% marginal rate, roughly $132 of each week comes back out in federal tax, leaving $468; the identical policy bought with after-tax dollars keeps the whole $600. Over a 12-week claim that is close to $1,600 of difference, decided years before the claim by who paid a premium of a few dollars a pay period. If your plan offers a choice about how the premium is treated, that is the arithmetic to run before open enrollment closes.
Where this comes from
The rules on this page that are specific rather than general are cited below. Follow a link to read the provision itself rather than taking our word for it:
- A disability benefit is excluded from income where the recipient paid the premium with money already taxedIRC 104(a)(3); IRC 105(a)
Related
- All benefit calculators
- How much of your SSDI is taxable
- Is your long-term disability benefit taxable?
- SSDI and long-term disability together
- Is workers' compensation taxable?
- Tax on Social Security and a 401(k)
- Household calculator
General information about how these benefits are taxed, not tax advice. Disability and benefit taxation turns on facts about your policy and your household that this page does not have, check with a tax professional before relying on a figure here.