Under what condition are group disability income benefits received by an employee not taxable as income?

Group disability income benefits received by an employee are not taxable as income when the benefits received are equal to or less than the employee's percentage of the contribution. This principle is based on how the premiums for the disability insurance are funded.

When an employer pays the premiums entirely, the benefits received by the employee are typically considered taxable income because the employee has not made any contribution towards the payment of those premiums. Conversely, if the employee contributes towards the premiums, especially in a manner that the received benefits do not exceed the amount they've contributed, the benefits are treated as a return of the employee's own funds, making them non-taxable.

This distinction is important for both financial planning and understanding tax implications for employees receiving disability benefits. It encourages employees to participate in their employer's plans and might also incentivize them to make contributions, ensuring that they can benefit from tax-free income in the event of a disability.