Tax Facts

226 / Is disability income payable under the provisions of a personal life insurance policy included in gross income?

No. Benefits received under a disability rider are tax-exempt as “amounts received through accident or health insurance … for personal injuries or sickness.” There is no limit on the amount of disability income that can be received tax-free.1 Benefits are exempt whether received by the insured, or by a person or corporation having an insurable interest in the insured.2

1. IRC § 104(a)(3).

2. Castner Garage, Ltd. v. Commissioner, 43 BTA 1 (1940).

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