What qualifies as a taxable pension?

A taxable pension from an employer-funded disability plan qualifies as taxable income because it is considered wages or earnings that were received in exchange for services performed. Such a pension typically arises when an employee has become disabled but is still eligible for compensation based on their previous employment and contributions. This compensation is treated similarly to regular income and is thus subject to federal income tax.

In contrast, pensions from government-funded retirement plans and individual retirement accounts may have different tax implications based on various factors, such as the contributions made and how the account was funded. Benefits received from Social Security also have their own unique taxation rules and generally are not classified as taxable pensions in the conventional sense. Hence, while pensions can vary widely depending on their source and the conditions under which they are received, the employer-funded disability plan is straightforwardly taxable under federal tax laws.