First, the fact that some of it is taxable to the federal, tells me the employer paid for some portion of the premiums. See Life insurance & disability insurance proceeds | IRS. This means if you paid all of your premium, all of your disability is tax free. If you paid 40% of your premium and your employer paid the rest, then 40% of your disability is tax free.
Second, IL DOR is limited in who is not taxed on disability.
- Link for IL Univ employees above - not taxable
- IL municipal Retirement Fund - not taxable
- Social Security - not taxable
Third, if you have private insurance that has a federal taxable portion, it sounds taxable in IL. (I called and escalated to a senior service specialist at IL DOR- this is for TY24 and rules do change).
My thoughts are that disability is actually is taxable to the state if it is taxable to the federal, except for the definitely not taxable section. Maybe that section is larger and they just didn't mention everything.
Note: the federal does share filings with the state. You may have federal income but not state, depending on your situation.
@williamsb645 IN also begins with the federal AGI so you may get a tax credit on IL for tax paid to IN.
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
