Disability Benefits Taxable Implications

Disability Benefits Taxable Implications

With the month of April just around the corner, you may be getting ready to prepare and file your taxes for 2018. Below, you will find summary information about the tax implications on your various disability benefits.

Employment Insurance (EI) sickness benefits

Employment Insurance sickness benefits are usually the first benefits received by an employee after they have exhausted their sick leave and are unable to continue working because of injury or illness.

The Employment Insurance program offers temporary financial assistance (up to a maximum of 15 weeks) to people unable to work because of sickness, injury, or quarantine. These benefits are taxable.

Canada Pension Plan Disability (CPPD) Benefits/ Québec Pension Plan (QPP) disability pension

If you qualify for and are receiving Canada Pension Plan Disability Benefits or Quebec Pension Plan Disability Pension, you should be aware that those benefits are taxable.

Short-term disability (STD) or long-term disability (LTD) benefits

Depending on the type of coverage you have either through personal insurance or group insurance coverage, you can apply for short-term disability benefits and/or long-term disability if you are unable to work due to an illness or injury. For more information on when and how to file a claim for short-term or long-term disability benefits, please refer to our disability benefits page.

According to recent changes by the Canada Revenue Agency (CRA), income from both short-term and long-term disability benefits are taxable to the employee at the time the payments are issued, except where the premium for these benefits is fully paid by the employee.

In other words, if as an employee, you pay all the premiums for your short-term or long-term disability insurance, those benefits are generally not taxed. On the other hand, if your employer pays any portion of the premiums for those benefits, then the benefits are taxable. Given the importance of the taxability of these benefits, employers, unions, and employees should all be concerned about who pays the premiums on these benefit plans.

If you are unsure as to who is paying the premiums for your disability plan, you can contact your insurance provider and they will notify you as to whether your benefits are taxable or not.

We are here to help navigate the long-term disability claim process. Consult one of our experienced Disability lawyers at Raven, Cameron, Ballantyne and Yazbeck LLP if you are considering making a claim for disability benefits or if your disability claim for benefits has been denied. 

[This article is for informational purposes only and does not constitute legal advice, which cannot be given without consideration of your individual circumstances.]