Disability pension payments receive a variety of treatments for tax purposes. Workers compensation payments are not taxable payments. They are however, included in income for determining various federal and provincial tax credits. Canada Pension Plan disability payments are taxable. Payments out of a private disability insurance plan may or may not be taxable depending upon how the plan was set up. If the plan is a group plan encompassing many employees, it must be determined at the outset by the whole group the treatment of the plan. If the employer pays for any part of the plan premiums, those claiming benefits in the future will be subject to tax. If the employees individually pay the plan premiums, any benefits will not be subject to tax. All individual plans such as those owned by self employed people are considered to be paid with personal funds and therefore not taxable if a claim for benefits is ever made.
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