It depends.
"Generally, if you pay the entire amount of the disability premium yourself, your disability benefits will be tax-free. This may bring your income while on disability closer to your current take-home pay.
If your employer pays all or part of the disability premium, your disability benefits will be subject to income taxes."
Information, as per Canada Revenue Agency (CRA):
Disability insurance - Canada.ca
- If your employer pays all or part of the disability premium, it is taxable.
- If you paid for the coverage off of each paycheck with pre-tax dollars, then it would be taxable.
- If you paid for the insurance with post-tax dollars, then this would be non-taxable.
- If a portion was paid with post-tax dollars and with pre-tax dollars and/or paid by your employer, then the percentage that was not paid with your post-tax dollars, would be taxable. (Your post-tax dollar portion would remain tax-free).
If your coverage is tax-free, then you are not required to include it on your tax return.
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