As we continue through income tax season, one question we frequently hear is whether critical illness benefits are taxable. While we always recommend contacting a tax consultant for any individual situation, here's a high-level overview.
Taxation of critical illness benefits
Any critical illness benefits totaling more than the costs incurred for medical care are generally taxable if the employee or employer paid the premium on a pre-tax basis.
It is also important to note that critical illness benefits may affect eligibility for public assistance like federal, state or local welfare programs.
This is a high-level overview of the taxation of critical illness benefits. For specific information, please consult a tax professional and/or your benefits representative.