What Is the STD Deduction on My Paycheck?
Understand the STD deduction on your paycheck. Learn how paying this premium for short-term disability coverage impacts whether your future benefits are taxed.
If you’ve noticed a deduction labeled “STD” on your paycheck, it stands for Short-Term Disability insurance. This benefit provides income protection if you are temporarily unable to work due to an illness or injury. The amount deducted from your pay is the premium for this coverage, and understanding its purpose and tax implications is useful for managing your finances.
Understanding Short-Term Disability Insurance
Short-term disability insurance replaces a portion of your earnings if you cannot work due to an illness or injury that is not related to your job. Work-related injuries are covered by workers’ compensation insurance, a separate type of coverage. STD insurance is designed to cover these temporary disabilities until you can return to work.
A component of an STD policy is the benefit amount, which is the percentage of your gross income the insurance will pay. Most plans cover between 40% and 70% of your regular earnings. For example, if your gross weekly salary is $1,000 and your policy covers 60%, your weekly benefit would be $600.
Another feature is the benefit period, or the maximum length of time you can receive payments. This period commonly lasts from three to six months, though some plans extend up to a year. This contrasts with long-term disability insurance, which is for more severe or prolonged conditions. The specific duration is defined in your policy documents.
Every STD policy includes an elimination period, or waiting period. This is a set number of days that must pass from the onset of your disability until you can begin receiving benefit payments. An elimination period is often between seven and 14 days. Employees frequently use paid time off, such as sick or vacation days, to cover their income gap during this waiting phase.
The Paycheck Deduction Explained
The deduction on your pay stub is the premium required to maintain your short-term disability insurance. By paying this premium, you ensure access to income replacement benefits if needed. The appearance of this deduction signifies your enrollment in a plan, which can happen in one of two ways.
STD insurance is often offered as a voluntary benefit through an employer-sponsored group plan. You may be given the option to sign up during open enrollment or when you are first hired. If you elect to participate, the premiums are deducted directly from your paycheck, giving you access to group rates that are often lower than individual plans.
Some states and territories mandate that employers provide short-term disability coverage. If you work in one of these locations, the deduction on your paycheck is likely mandatory, with the cost often shared between you and your employer. As of 2025, these locations include:
- California
- Hawaii
- New Jersey
- New York
- Puerto Rico
- Rhode Island
Tax Treatment of Premiums and Benefits
The tax implications of short-term disability insurance are tied to how the premiums are paid. The distinction between pre-tax and post-tax premium payments determines whether the benefits you receive are considered taxable income.
When you pay for STD insurance premiums with your own post-tax dollars, any benefits you receive from the policy are not subject to federal income tax. This is a frequent scenario for voluntary plans where the deduction is taken from your net pay after taxes are calculated. Because you have already paid taxes on the money used for the premium, the IRS does not tax the benefit payments.
Conversely, if your employer pays the premiums, or if you pay them with pre-tax dollars, the benefits you receive are considered taxable income. Because the premiums were paid with money that had not yet been taxed, the benefits must be included in your gross income. This means you will owe federal, and potentially state and local, income taxes on the disability payments.