Will I Have To Pay Taxes On Any Settlement You Are Able To Win For Me?
The tax treatment of a settlement of a short-term or long-term disability claim will depend on a number of criteria that vary from case to case. If the benefits were structured in such a way that when they are paid out on either a periodic basis (weekly, bi-weekly, monthly) that they are non-taxable, then a lump sum settlement would also be non-taxable. When the periodic payments are part of a taxable benefit plan, the settlement would likely include a portion that is taxable and a portion that is non-taxable (arrears would be taxable and amounts considere future benefits would be non-taxable). The determination of whether benefits are taxable or not is based on whether the employer paid all or part of the premiums for the benefits. If they did, then the benefits would be taxable. If the benefits are paid by the employer directly (usually short-term claims), they would be taxable.
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