Short
term disability (STD) payments can take one of two forms. They can be a taxable
wage replacement benefit, or a non-taxable insurance benefit.
Whether a STD benefit is taxable or not depends on who
is paying the premium to the insurance company.
There is no easy answer as every circumstance is different and laws vary from state to state. Here are some general guidelines:
If
your employer pays the premium for the disability insurance product, than any
payment you receive is taxable to you as a taxable wage replacement payment.
The insurance contract is considered to be a "wage replacement" and
not a pure insurance payment.
If
you, the employee, purchase the insurance product with after tax money, than
the payment of the benefit is not taxable income to you. The payments you
receive are not considered to be a wage replacement payment.
- Supplemental
Security Income (SSI) payments are not taxable under IRS regulations.
- If you receive disability retirement benefits before the age of
retirement, these may be taxable.
These are just a few general scenarios, but again, a lot depends on your state and individual circumstances. For this reason, you should enter every tax form (W-2, Form 1099-MISC, Form 1099-R, etc.) that you receive into TurboTax. TurboTax will calculate the amount of your refund or amounts owed based on this information.
