You must report as income on your tax return any amount you receive for a disability through an accident or health insurance plan paid for by your employer. If you paid the entire cost of a health or accident insurance plan, you don’t have to include amounts you receive for your disability as income. In one case, a taxpayer’s employer provided disability insurance to employees and paid 100% of the premiums. The taxpayer received $105,000 in disability payments and didn’t report them on his joint return. The U.S. Tax Court ruled that the disability payments weren’t excludable from his gross income and, therefore, he owed $26,292 in tax and an accuracy-related penalty. (TC Summary Op. 2023-17)
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