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Taxation of Long-Term Disability Benefits. In general, if the premiums for your LTD policy were paid for with before-tax dollars (as is almost always the case with an employer-provided group plan), your LTD benefits are taxed as ordinary income to you.
Some states tax Social Security and SSI disability benefits while others don't. Social Security payments, whether from Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI), may be taxable in your state. The majority of states, however, exempt disability benefits from taxation.