Yes, CalSTRS disability benefits are taxable to the extent that they aren't a repayment of your contributions. Your Form 1099-R should include this information.
If your children receive separate Forms 1099-R in their Social Security numbers, then the amount is taxable to them if they are required to file. If their income is less than the filing requirement, then they don't need to file. If the payments for them are included in your 1099-R, then they are included in your taxable income.
CalSTRS pays an additional benefit amount for your eligible dependent children—up to an additional 40% of final compensation. For example, a member with one child may receive an additional 10% of final compensation.
To be eligible, your children must be financially dependent, which means you provide at least one-half of your child’s support. You will be required to provide evidence of your child’s financial dependence. You also must notify CalSTRS when a dependent child no longer meets the eligibility requirements.
See this CalSTRS disability guide for more information.
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