Disability insurance - Pay your
own premiums!
Income Tax Act s. 6(1)(f)
If you receive disability insurance, it will
be tax-free if you have paid for the insurance, or if the
insurance costs for all employees was paid by the employer, and
included in
the taxable income of each employee. If the employer pays
for all or part of the insurance and does not include the insurance cost in
the taxable income for all employees, then disability insurance received will be
taxable, net of any premiums paid into the plan by the employee after
1967. The following is a
quote from the Canada Revenue Agency bulletin IT-428
Wage Loss Replacement Plans:
Where an employee-pay-all plan exists and provides for the employer to pay the employee's premiums to the plan and to account for them in the manner of wages or salary, the result is as though the premiums had been withheld from the employee's wages or salary.
Disability insurance costs are not tax
deductible for employees.
Tax
tip: Pay for your own disability insurance, or
make sure your employer adds the cost to your taxable
income.
Revised: November 18, 2009