The Tax Implications of Disability Income

Sidney Kess, , JD, LLM, CPA, and Aaron Moss, , JD

The Centers for Disease Control and Prevention (CDC) reports that 61 million adults in the United States have some type of disability affecting mobility, cognition, hearing, or vision (https://bit.ly/3ujKOlv). According to the Council for Disability Awareness, just over 1 in 4 of today's young adults will become disabled before retirement. Surprisingly, 90% of disabilities are caused by illnesses, not accidents (https://bit.ly/3LnP2zF). One-quarter of disabilities will last for three months or longer, and these disabilities might prevent or limit self-care, independent living, or the ability to work. Financial assistance may be available through government programs, insurance, or employer plans. The source of this income dictates the tax results.