B Disability Insurance Payments Examples

1)    Reduced Disability Insurance Amount

The customer is out of work and getting short-term disability insurance payments.  The proof provided by the insurer shows that he is entitled to a maximum benefit of $1,250.00 per month.  However, he also gets a monthly Social Security Disability payment of $820.00. 

The $820.00 from Social Security is deducted from the maximum short-term disability benefit, resulting in an actual disability insurance payment of $430.00.  Only the $430.00 actually paid is considered as disability insurance income.

2)    Taxable Disability Insurance Amount (MAGI Only)

The customer is getting long-term disability benefits of $1,500 per month.  The proof provided by the employer shows that the customer’s long-term disability premiums were split between the employer and the customer with each paying half.  The employee’s half of the premiums were paid with after-tax income.

Since half of the premium was paid by the employee with after-tax income, half of the $1,500 payment is excluded from counting as income.  The other half of the payment is counted since the other half of the premium was paid by the employer.