Short-term disability (STD) replaces part of your paycheck while you’re unable to work because of illness, injury, surgery, or childbirth. Whether those payments are taxed depends almost entirely on one question: who paid the premiums, and were they paid with pre-tax or after-tax money?
Quick answer: Short-term disability is taxable if your employer paid the premiums, or if you paid them with pre-tax dollars through a cafeteria plan. It’s not taxable if you paid the full premium yourself with after-tax dollars. If you and your employer shared the cost, only the part of the benefit that comes from your employer’s share is taxable.
The Key Rule: Who Paid the Premiums?
The IRS taxes short-term disability benefits based on how the coverage was paid for. Benefits from coverage paid by your employer, or by you with pre-tax dollars, are taxable income. Benefits from coverage you paid for entirely with after-tax dollars aren’t taxable.
What IRS Publication 525 says
IRS Publication 525 sets out the rule for accident and health plans, which include disability coverage:
- You paid the whole cost: “If you pay the entire cost of an accident or health plan, don’t include any amounts you receive” for personal injury or sickness in your income.
- Your employer paid: sick pay from an insurer paid for by your employer is taxable income.
- Cafeteria plans: if your premiums weren’t included in your income (meaning they were deducted pre-tax), you’re treated as not having paid them, so the benefits are taxable. If the premiums were included in your income, “you’re considered to have paid the premiums,” and the benefits aren’t taxable.
- You both paid: if both you and your employer pay for the plan, only the part of the benefit that comes from your employer’s payments is taxable.
These rules come from Sections 104(a)(3) and 105(a) of the Internal Revenue Code, which exclude benefits from coverage you paid for and tax benefits attributable to employer contributions.
How much of short term disability is taxable?
It depends on the funding:
| How premiums were paid | How much of the benefit is taxable |
| 100% by your employer | 100% |
| By you, through pre-tax payroll deductions | 100% |
| By you, with after-tax dollars | 0% |
| Shared between you and your employer | The employer’s share, based on the last three policy years |
How to check how your coverage is paid
- Look at your pay stub. An STD deduction listed before taxes means pre-tax; one taken after taxes means after-tax. No deduction usually means your employer pays.
- Check your benefits enrollment. Some employers let you choose to pay STD premiums after tax so the benefits are tax-free.
- Ask HR or the insurer. They can confirm the funding and what percentage your employer contributes.
Four Ways Short-Term Disability Can Be Taxed
Most STD plans fall into one of four funding setups, and each has a different tax result. The examples below use a hypothetical employee earning $1,000 a week whose plan pays 60%, or $600 a week. Tax rates are illustrations only.
Scenario 1: Your employer pays 100% of the premiums
If your employer pays the full premium, your short-term disability benefits are fully taxable. Is employer paid short term disability taxable? Yes: it’s treated like sick pay and reported as wages.
Weekly benefit: $600
Federal income tax (example 12%): −$72
Social Security and Medicare 7.65%: −$45.90
Take-home (before state tax): about $482
Social Security and Medicare apply in the first six months, as explained below.
Scenario 2: You pay with pre-tax dollars
If your STD premiums are deducted from your paycheck before taxes, usually through a Section 125 cafeteria plan, you didn’t pay tax on the premium dollars. IRS Publication 525 treats those premiums as paid by your employer, so the benefits are fully taxable, exactly as in Scenario 1.
Scenario 3: You pay with after-tax dollars
If you pay the entire premium with after-tax money, either through payroll deductions taken after tax or a private individual policy you buy yourself, the benefits aren’t taxable for federal income tax.
Weekly benefit: $600
Federal tax: $0
Take-home: $600
That’s why some employees choose to pay their STD premiums after tax when given the option: they pay a little more tax now in exchange for tax-free benefits if they need them.
Scenario 4: You and your employer share the cost
When both you and your employer pay part of the premium, only the share of the benefit attributable to your employer’s payments is taxable. IRS Publication 15-A says the taxable portion is figured by multiplying the total sick pay by the percentage of the policy’s cost contributed by the employer over the three policy years before the calendar year of the payment.
Here’s a hypothetical example, assuming your share was paid after tax:
Premiums over the last three policy years:
Employer: $600 + $600 + $700 = $1,900
Employee: $400 + $400 + $300 = $1,100
Total: $3,000
Employer share = $1,900 ÷ $3,000 = 63.3%
Weekly benefit $600:
Taxable: $600 × 63.3% = $380
Tax-free: $600 − $380 = $220
If your share was paid pre-tax, it counts as employer-paid, and the whole benefit is taxable.
Short-term disability tax rules at a glance
| Premium funding | Tax status of premiums | Taxability of benefits | Report on your tax return? |
| 100% employer-paid | Not taxed to you | Fully taxable | Yes, as wages |
| Employee-paid, pre-tax (Section 125) | Not taxed to you | Fully taxable | Yes, as wages |
| Employee-paid, after-tax | Taxed as part of your pay | Not taxable | No, if fully after-tax |
| Shared cost | Employer share not taxed; your share depends on how you paid | Employer share taxable | Yes, for the taxable part |
| Private policy you bought yourself | Paid with after-tax money | Not taxable | No |
Is Short Term Disability for Maternity Leave Taxable?
Short-term disability for maternity leave follows the same tax rules as any other STD claim. If your employer paid the premiums or you paid pre-tax, the benefits are taxable; if you paid after tax, they aren’t. Pregnancy doesn’t change the tax treatment.
How maternity leave is usually paid
New parents often receive income from more than one source during leave, and each can be taxed differently:
| Source | Typical tax treatment |
| Employer or insurer STD for recovery from childbirth | Depends on who paid the premiums, as above |
| Employer paid sick leave or vacation | Taxable wages |
| State disability program, such as California DI | Depends on the state program’s rules |
| State paid family leave for bonding, such as California PFL, New York PFL, or New Jersey FLI | Generally taxable for federal income tax |
| Employer-paid parental leave policy | Taxable wages |
Short-term disability usually covers the period your doctor certifies you can’t work after giving birth, commonly around six weeks for a vaginal delivery and around eight weeks for a C-section, depending on the plan and your doctor. Bonding time after that is usually covered by paid family leave, if your state or employer offers it, rather than STD.
A maternity leave example
Here’s a hypothetical example for an employee earning $1,000 a week whose employer-paid STD plan pays 60% for six weeks:
STD benefit: $600 × 6 weeks = $3,600 taxable income
If premiums were after-tax: $3,600 tax-free
If you’re planning a pregnancy and your employer lets you choose, paying STD premiums with after-tax dollars ahead of time can make the benefits tax-free. Check your plan’s rules on pre-existing conditions, since some plans won’t cover a pregnancy that began before coverage started.
Note: Keep a record of every payment, the payer, and any tax withheld during your leave. Benefits from different sources may arrive on different tax forms, and you’ll need all of them when you file.
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Is Short Term Disability Taxable in Your State?
State tax depends on your state’s income tax rules and whether it runs its own disability program. States with no income tax, such as Texas and Florida, don’t tax STD. Most other states start from your federal income, so benefits that are federally taxable are usually state-taxable too, with some notable exceptions such as Pennsylvania and California’s state programs.
States with no income tax: Texas and Florida
Is short term disability taxable in Texas or Florida? Not at the state level, because neither state has a personal income tax. Federal tax still applies under the IRS rules above.
California
California runs State Disability Insurance (SDI), which includes Disability Insurance (DI) and Paid Family Leave (PFL). In 2026, employees contribute 1.3% of wages, with no wage cap. According to California’s EDD:
- DI benefits are usually not taxable. The exception is when you were already receiving unemployment and then became disabled; DI is then treated as a substitute for unemployment and is taxable federally, up to your unemployment benefit amount.
- PFL benefits are taxable on your federal return and reported on Form 1099-G.
- California state tax: benefits reported on Form 1099-G are exempt from California income tax.
If you also receive STD from a private employer plan, that plan follows the IRS premium rules.
New York
New York requires most employers to provide Disability Benefits Law (DBL) coverage and Paid Family Leave. In 2026, employees can be charged 0.5% of wages for DBL, up to $0.60 a week, and 0.432% for PFL, up to $411.91 a year. New York’s tax department says PFL premiums are deducted from after-tax wages and PFL benefits are taxable federal income, reported on Form 1099-G or 1099-MISC. DBL benefits follow the federal premium rules: the share tied to employer-paid premiums is taxable.
New Jersey
New Jersey runs Temporary Disability Insurance (TDI) and Family Leave Insurance (FLI). In 2026, workers contribute 0.19% for TDI and 0.23% for FLI on wages up to $171,100. New Jersey’s labor department says FLI benefits are federally taxable in the year paid and reported on Form 1099-G; TDI-only recipients don’t receive a 1099-G. Check New Jersey’s guidance on how TDI is taxed, since it depends on employer and employee contributions.
Pennsylvania
Pennsylvania treats disability pay differently from federal rules. Its Department of Revenue says sick pay is taxable when it represents regular wages, but “payments made by third party insurers for sickness or disability are not taxable income for Pennsylvania purposes.” Disability benefits paid by your employer are taxable for PA; those paid by a third-party insurer are not.
States with new paid leave programs: Massachusetts, Colorado, and Minnesota
These states run paid family and medical leave programs funded by payroll contributions: Massachusetts PFML (0.46% combined in 2026), Colorado FAMLI (employees pay 0.44% at employers with 10 or more workers), and Minnesota Paid Leave, which began contributions on January 1, 2026. These programs are separate from private STD. State income tax treatment of their benefits varies, so check each state’s tax guidance.
Ohio, Illinois, Wisconsin, and Michigan
These states calculate income tax starting from your federal income. In general, STD benefits that are taxable federally are also taxable for state income tax, and benefits that are tax-free federally are usually tax-free for the state. Check your state’s instructions for any specific subtractions.
13-state summary
| State | State income tax? | State disability or paid leave program | State tax treatment of private STD |
| Texas | No | No | Not taxed by the state |
| Florida | No | No | Not taxed by the state |
| California | Yes | SDI (DI and PFL), 1.3% employee rate, no cap | Generally follows federal rules; SDI benefits on Form 1099-G exempt from CA tax |
| New York | Yes | DBL and PFL | Generally follows federal rules |
| New Jersey | Yes | TDI and FLI | Check NJ guidance; depends on contributions |
| Pennsylvania | Yes, flat rate | No | Third-party insurer payments not taxable; employer-paid taxable |
| Massachusetts | Yes | PFML | Generally taxed like wages; check MA guidance |
| Colorado | Yes | FAMLI | Generally follows federal income |
| Minnesota | Yes | Paid Leave (from 2026) | Generally follows federal income |
| Ohio | Yes | No | Generally follows federal income |
| Illinois | Yes | No | Generally follows federal income |
| Wisconsin | Yes | No | Generally follows federal income |
| Michigan | Yes | No | Generally follows federal income |
Note: State rules change and can include exceptions not covered here. If you live in one state and work in another, both may have rules that apply. A tax professional or your state’s revenue department can confirm your situation.
Tax Forms for Short-Term Disability: W-2 vs. 1099
Most private short-term disability benefits are reported on a Form W-2, either from your employer or from the insurance company. State paid family leave and some state disability benefits are reported on Form 1099-G instead. Disability pensions from an employer retirement plan are usually reported on Form 1099-R.
Form W-2 and third-party sick pay
When an insurance company pays your STD benefits, the IRS calls this third-party sick pay. Under IRS Publication 15-A:
- A W-2 is required even if nothing is taxable: “A Form W-2 must be prepared even if all of the sick pay is nontaxable.”
- Box 1: shows the taxable portion of the sick pay, which you report as wages.
- Box 12, code J: shows sick pay paid by a third party that “wasn’t includible in income,” typically because you paid the premiums with after-tax dollars.
- Box 13: the “Third-party sick pay” box is checked when the amounts were paid by a third party.
You may get a separate W-2 from the insurer, or your employer may include the sick pay on your regular W-2. If you’re not sure, ask your HR or payroll team.
When you’ll get a Form 1099
- Form 1099-G: state programs use this for benefits treated like unemployment, such as California PFL, New Jersey FLI, and California DI when it replaces unemployment benefits. New York PFL may be reported on a 1099-G or a 1099-MISC.
- Form 1099-R: used for disability pensions and some long-term disability payments from retirement plans.
- No form: if you bought a private policy entirely with after-tax money and the benefits aren’t taxable, you may not receive any tax form.
Tax form summary
| Form | Who issues it | What it shows | Where it goes on Form 1040 |
| W-2, Box 1 | Employer or insurer | Taxable sick pay | Wages line |
| W-2, Box 12 code J | Employer or insurer | Nontaxable sick pay | Not included in income |
| W-2, Box 13 checked | Employer or insurer | Paid by a third party | For information |
| 1099-G | State agency | State paid family leave or taxable state disability benefits | Unemployment compensation line on Schedule 1 |
| 1099-MISC | Employer or carrier (some states’ PFL) | Taxable leave benefits | Other income on Schedule 1 |
| 1099-R | Plan administrator | Disability pension or retirement plan disability payments | Pensions and annuities line |
Note: The rules on where to report each type of income can change from year to year. Use the current Form 1040 instructions or tax software, and keep every form you receive.
Withholding, Form W-4S, and Social Security Tax
Taxable STD paid by an insurance company often has no federal income tax withheld unless you ask for it, which can leave you with a tax bill in April. Form W-4S lets you request withholding. Social Security and Medicare taxes usually apply for the first six months after you stop working.
Why you might owe tax later
IRS Publication 15-A explains that “sick pay paid by a third party that isn’t your agent isn’t subject to mandatory federal income tax withholding.” If the insurer doesn’t withhold and your benefits are taxable, the tax is still due when you file. Your employer, by contrast, must generally withhold when it pays sick pay itself.
How to use Form W-4S
Form W-4S, Request for Federal Income Tax Withholding From Sick Pay, is given to the third-party payer, usually the insurance company, not your employer.
- Get the form from IRS.gov or from the insurer.
- Enter the flat dollar amount you want withheld from each payment.
- Send it to the insurer, not the IRS.
- Check your first payment to confirm the withholding was applied.
You can also make estimated tax payments instead, or raise the withholding at a job your spouse has if you file jointly.
Do you know your STD is taxable?
├── No → Check your pay stub and ask HR how premiums are paid
└── Yes → Is tax being withheld from your benefit checks?
├── Yes → Check it’s enough for your tax bracket
└── No → Send Form W-4S to the insurer, or make estimated payments
The six-month rule for Social Security and Medicare
Taxable sick pay is generally subject to Social Security and Medicare taxes (FICA) at first. Publication 15-A says these taxes “don’t apply to sick pay paid more than 6 calendar months after the last calendar month in which the employee worked.” If you return to work during your absence, the six-month count starts again.
For example, if you last worked in March, sick pay paid in April through September is subject to FICA, and sick pay paid from October onward is not. Most short-term disability claims end within six months, so FICA usually applies to STD benefits. Federal income tax still applies to taxable benefits regardless of how long you’ve been out.
Note: The part of a benefit that comes from your own after-tax premiums isn’t taxable, so it isn’t subject to income tax or FICA at any point.
How Much Will You Actually Take Home?
Short-term disability usually replaces only part of your pay, often around 60%, and taxable benefits shrink further after tax. Knowing your likely take-home amount in advance helps you plan your budget and decide whether you need extra savings or coverage.
Step 1: Check your plan details
Look at your benefits summary or ask HR for:
- The percentage of pay replaced and any weekly maximum
- The waiting period (elimination period) before benefits start
- How long benefits last
- Whether premiums are employer-paid, pre-tax, or after-tax
Step 2: Estimate your take-home pay
Here’s a hypothetical example for someone earning $1,000 a week:
Normal gross pay:$1,000 a week
STD benefit at 60%:$600 a week
If the benefit is taxable:
Federal income tax (example 12%):−$72
FICA (first 6 months) 7.65%:−$45.90
Take-home:about $482, or 48% of normal gross pay
If premiums were paid after tax:
Take-home: $600, or 60% of normal gross pay
State income tax, if any, lowers the taxable figure further. Remember that your regular paycheck also had taxes taken out, so the drop in take-home pay is smaller than the drop in gross pay.
Step 3: Plan for the gap
- Build an emergency fund that can cover the waiting period and the shortfall between your benefit and your normal pay.
- If your employer offers it, consider paying STD premiums with after-tax dollars to make future benefits tax-free.
- Consider a private individual disability policy if you have no workplace coverage or need more.
- Make sure your family is protected if the worst happens, with enough life insurance. M Life Insurance’s guide to how much life insurance you need can help you estimate it, and its article on whether life insurance is taxable explains how death benefits are generally treated.
Note: Short-term disability covers a temporary loss of income, not a death. Life insurance and disability coverage do different jobs, and many households need both.
Conclusion
Whether short-term disability is taxable comes down to how the premiums were paid. Employer-paid and pre-tax coverage produces taxable benefits, after-tax coverage produces tax-free benefits, and shared plans are split based on the employer’s share over the last three policy years. State rules add another layer, especially in California, New York, New Jersey, and Pennsylvania.
| Your situation | What it usually means for taxes |
| Employer pays the full STD premium | Benefits are taxable; consider Form W-4S |
| Premiums deducted pre-tax from your pay | Benefits are taxable |
| You pay premiums after tax | Benefits are tax-free federally |
| You and your employer share the cost | Only the employer’s share is taxable |
| You live in Texas or Florida | No state income tax on benefits |
| You live in Pennsylvania | Third-party insurer benefits aren’t taxed by PA |
| You receive California DI | Usually not taxable unless it replaced unemployment |
| You receive state paid family leave | Generally taxable federally, reported on Form 1099-G |
Protect Your Family’s Income With M Life Insurance
Short-term disability helps while you’re out of work, but it doesn’t protect your family if something happens to you. M Life Insurance can help you compare term, whole life, and final expense coverage and talk through how much your family would need. Compare policies at M Life Insurance, or call (800) 661-8136 to speak with a licensed agent.
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FAQS
Usually, yes. Short-term disability paid through an employer plan is reported on a Form W-2, either your regular one from your employer or a separate one from the insurance company. IRS Publication 15-A says a W-2 must be prepared even if all the sick pay is nontaxable. Taxable amounts appear in Box 1, nontaxable third-party sick pay in Box 12 with code J, and Box 13 is checked for third-party sick pay.
The main downsides are that it replaces only part of your income, often around 60%, there’s usually a waiting period of one to two weeks before benefits start, and benefits typically last only a few months. If the benefits are taxable, your take-home amount can be noticeably lower than the stated percentage. Some plans also exclude pre-existing conditions.
Not usually for private employer STD, which is normally reported on a W-2. You may receive a Form 1099-G for state paid family leave, such as California PFL or New Jersey FLI, or for state disability benefits treated as a substitute for unemployment. New York PFL may come on a 1099-G or 1099-MISC, and disability pensions from a retirement plan are reported on Form 1099-R.
If you are looking for the cheapest and happiest state for retirees then the two states stand out the first is Tennessee and the second is Florida and both states offer you affordable living, good weather and lots of entertainment.
Partly. If you paid your share with after-tax dollars, the part of the benefit that comes from your contributions is tax-free, and the part from your employer’s contributions is taxable. The taxable share is based on the percentage your employer paid over the three policy years before the year of the payment. If your share was paid pre-tax, the whole benefit is taxable.
Sources and 2026 Verification
- IRS Publication 525: Taxable and Nontaxable Income
- IRS Publication 15-A: Employer’s Supplemental Tax Guide (sick pay reporting)
- California EDD: SDI Form 1099G FAQs
- CalChamber: 2026 California SDI withholding rate
- EY Tax News: 2026 state disability and paid leave rates and wage bases
- New York State Department of Taxation: Paid Family Leave
- New Jersey Department of Labor: Tax forms for leave benefits
- Pennsylvania Department of Revenue: Gross compensation
Disclaimer: This article is general information, not tax or legal advice. Tax examples are hypothetical and simplified. Federal and state tax rules can change, and your situation may involve details not covered here. For advice about your own taxes, consult a qualified tax professional or your state’s revenue department.
Joyce Espinoza, Expert Life Insurance Agent
Joyce Espinoza is a trusted life insurance agent at mLifeInsurance.com. She’s been in the insurance industry for over ten years, helping people, especially those with special health conditions to find the right coverage. At MLife Insurance, Joyce writes easy-to-understand articles that help readers make smart choices about life insurance. Previously, she worked directly with clients at Mlife Insurance, advising nearly 3,000 of them on life insurance options.
