What percentage of individually owned disability income benefits is taxable?

Individually owned disability income benefits are generally not taxable to the recipient. This means that if an individual pays the premiums for a disability income policy with after-tax dollars, the benefits received in the event of a disability are not subject to income tax. The rationale behind this is that the individual has already paid taxes on the money used to purchase the insurance, thereby allowing them to receive benefits tax-free.

In contrast, if an employer pays the premiums for a group disability policy and does not withhold taxes from the benefit payments, those benefits would typically be taxable to the employee upon receipt. This distinction is important for understanding tax implications related to disability insurance.

Thus, the correct understanding here is that no portion of benefits from an individually owned disability income policy is taxable if the premiums were paid by the insured using after-tax income.