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The answer depends on who pays the premiums. If you pay for the disability insurance yourself, out-of-pocket, the benefits you receive are 100% tax free. If your employer pays the premium, you pay tax on the benefits you receive while disabled.

Social Security disability benefits may be taxed. If you file a federal income tax return as an individual with a combined income between $25,000 and $34,000 - 50% of your Social Security benefits are subject to income tax. If your combined income exceeds $34,000 - 85% of your Social Security benefits are subject to income tax.