Hal_Al
Level 15

Get your taxes done using TurboTax

That seems like a straight forward question. Generally, SweetieJean's answer is correct, it will be taxed at your marginal rate. However, the great American tax system is not straight forward. So, the answer to your question is: "it depends".

SS and medicare tax (FICA) are unlikely to be required. Some short term disability payments are treated as wages and subject to FICA. But, you don't need to do anything. If that is the case, your employer will withhold FICA and report the income on a W-2. W-2 income is subject to federal, state and local income tax.

Disability income may or may not be subject to income tax. It depends on how the plan was funded. If the plan is totally funded by your employer, it is all taxable income to you and will be reported on either a 1099-R (most likely) or a W-2. If a 1099-R, it is subject to federal income tax. Some states tax it, some don't. A 1099-R is not subject to most local income tax.

If the disability pay is from an insurance policy, that you paid for with after tax money, it is tax free.

You'll have to ask you employer about medical/dental premium deductions. You'll probably also have to ask them about whether it will be reported on a W-2, 1099-R or is tax free.



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