Long-term disability (LTD) insurance is a form of insurance that replaces an individual’s income while they are unable to work due to a disability. Many people, however, are confused if the money they get from LTD insurance is taxable. The tax consequences of LTD income in Ontario might be complicated, and it’s critical to understand how the Canada Revenue Agency treats it (CRA).
Navigating the legal procedure might be difficult if you have a long-term disability. Our long-term disability lawyers at Verkhovets Law are committed to providing thorough advice and representation to those who are experiencing issues with their long-term disability claims. We have the expertise and experience to assist you in understanding your rights and alternatives, as well as to ensuring that you obtain the financial assistance you require to recover. Don’t go through this alone; call us immediately for a free consultation and allow us to assist you in obtaining the justice you deserve.
Taxation of LTD Benefits
LTD benefits are taxable income in Ontario, just like any other income received from employment or investments.
- The LTD benefits are taxed at the same marginal tax rate as the rest of your income.
- The insurance company that provides the LTD benefits must provide a T4A slip for the benefits paid during the year, which must be included in your income tax return.
- Any LTD benefits received will be added to your other income and used to determine your tax liability.
Disability Tax Credit
You may be able to lower your tax bill if you are qualified for the Disability Tax Credit (DTC).
- The DTC is a non-refundable tax credit available to those who suffer a severe and long-term disability in physical or mental functions.
- If you qualify for the DTC, you may be able to claim extra deductions or credits on your income tax return, lowering the amount of tax you owe.
- To apply for the DTC, you must complete and have signed Form T2201, Disability Tax Credit Certificate, by a certified practitioner.
Long-term disability insurance income is taxed in Ontario, just like any other income received via job or investments. However, if you qualify for the Disability Tax Credit, you may be able to lower your tax payment. It is essential to seek the advice of a tax expert or a financial adviser to fully understand the tax implications of your LTD income and to ensure that you are taking full advantage of any deductions or credits to which you are eligible. In the event of an audit, it is also critical to preserve precise records of your revenue and spending.