385 / How are disability pension payments taxed to self-employed individuals when made from a qualified pension or profit-sharing plan?

If a self-employed individual draws benefits from a plan because of permanent disability, the disability payments will be taxed under the same rules that apply to retirement benefits ( Q 3969).

If a self-employed individual receives disability payments through health insurance, the employee may exclude from gross income any amounts attributable to nondeductible contributions as a self-employed person.¹

Where contributions under a qualified plan are applied to provide incidental accident and health insurance for a self-employed individual, the insurance is treated as if the employee had purchased it directly from the insurance company.²

1.     IRC §§ 105(g), 104(a)(3); Treas. Reg. §§ 1.105-1(a), 1.105-5(b).