Sick Pay: When Is It Taxable?
Published November 6, 2026
Sick pay is money you receive while you are sick or injured and cannot work. Whether it is taxable depends on who paid it and who paid the insurance premiums. This guide explains the main rules. It is general information. It is not advice about your return.
Pay from your employer
Pay you receive from your employer while you are sick or injured is part of your salary or wages. It is taxable income. This is true for regular pay you get from your employer during an illness or injury. Include it with your other wages when you prepare your return. If your employer pays you from a sick leave bank, that pay is still part of your wages.
Sick pay from another payer
Sick pay can also come from a source other than your employer. Publication 525 says you must include sick pay benefits in your income when they come from any of these payers:
- A welfare fund.
- A state sickness or disability fund.
- An association of employers or employees.
- An insurance company, if your employer paid for the plan.
When sick pay is not taxable
If you paid the premiums on an accident or health insurance policy yourself, the benefits you receive under that policy are not taxable. The key question is who paid the premium. Keep records that show your premium payments, such as deductions on your pay stubs or statements from your insurer.
Two people can receive the same monthly amount from an insurer and have different tax results. The difference is who paid the premium. If your employer paid it, the benefit is income. If you paid it with your own money, the benefit is not taxable. If you are unsure who paid, ask the payer in writing.
If you are not sure whether a payment is taxable, keep the payer's statement next to your premium records and compare them.
Railroad sick pay
Sick pay under the Railroad Unemployment Insurance Act is taxable, and you must include it in your income. The exception is pay for an on-the-job injury. Do not include that part in your income.
An example
Keisha is out of work for three weeks after surgery. Her employer pays her regular pay for those weeks, and that pay is part of her wages. Keisha also receives payments from a short-term disability policy that her employer bought for her. Her employer paid the premiums, so those payments are income. Her cousin works at a different job, and he paid the premiums on his own policy. His benefits from that policy are not taxable. The difference is the premium payer, not the name of the benefit. This example uses made-up facts. It shows the premium rule, not a result for a real return.
Common mistakes
- Assuming all sick pay is not taxable. Pay from your employer is wages.
- Skipping the premium question. Who paid the premium decides the result for insurance benefits.
- Assuming a payment is not taxable because it looks like insurance. Read the payer's statement.
Next steps
Gather your pay stubs and any statements from insurers or funds. For each policy or plan, find out who paid the premiums. Write down each payment and its payer. Ask your employer for its record of sick pay paid during the year. Keep copies of every statement you receive. For how wages appear on your return, read our guide to Form W-2 boxes explained and pay stub check.
Upload your documents and answer a few simple questions. Your preparer reviews every deduction and credit and lets you know when your return is ready to sign.
Sources: Sources: IRS, Publication 525 (2025), Taxable and Nontaxable Income, Sick pay and Sickness and Injury Benefits (https://www.irs.gov/pub/irs-pdf/p525.pdf) This is general information, not advice about your specific return.
