Determining if you must claim your Long Term Disability Benefits on your tax return depends on who paid the premiums for the benefits.
- Generally, if you pay the entire amount of the disability premiums yourself, your disability benefits will be tax-free. This means your employer has deducted the premiums from your pay and remitted them on your behalf. You will not receive a T4A slip for the benefits and you do not claim income on your tax return.
- If your employer pays all or part of the disability premium, your disability benefits will be subject to income taxes. In this case, you will be issued a T4A slip for the benefits you receive and will report the income and tax withheld on the T4A slip page in TurboTax.
- If your employer has paid all or part of the premiums, you will likely be issued a letter from your employer and can deduct any premiums you have paid from the taxable amount of benefits received.
Here's a link from TaxTips.ca explaining further the tax implications of Wage-Loss Replacement plans: Disability Insurance - Pay Your Own Premiums!
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