Is NJ state disability taxable?

[LenaH]

Temporary Disability benefits (including family leave insurance benefits) are not subject to the New Jersey state income tax according to NJ Dept of Taxation FAQs. 

In New Jersey, temporary disability benefits are treated in the same manner as third-party sick pay. If you receive these types of benefits, they are subject to Social Security withholdings. At the end of the year, you will receive a W-2 listing the amount of sick benefits received, since they are taxable under federal law.

[DHOPE1]

WHAT IF YOU HAVE NOT RECEIVED ANYTHING FOR THE STATE OR EMPLOYEE REGARDING THE DISABILITY? WHAT DO YOU DO TO FIND THE INFOR

[JohnW152]

If you received temporary disability insurance benefits in 2022, your employer will report the taxable portion of your benefits on your 2022 Form W-2. 

If you haven't received your Form W-2, you should contact your employer immediately to get a copy. You also may be able to get your information from the IRS.  Please see the TurboTax Help article What if it's February but I still don't have my W-2? for guidance.

If your Temporary Disability benefits aren't reported on your W-2 -- they're often reflected as "third party sick pay" or "other wages" -- you should contact your employer directly to have it corrected.  Please see Is Your W-2 Missing Temporary Disability Tax Information? in the How Temporary Disability Benefits Are Taxed dropdown on the New Jersey Department of Labor and Workforce Development's Temporary Disability Insurance page.

@DHOPE1 

[user17722420718]

My employer listed NJ temporary state disability payments under third party sick pay but they only listed about 30-40 percent of the total amount I received from the state. Is not the whole amount I received from the state taxable for federal tax purposes?

[user17722420718]

Now I'm under the understanding that my employer pays a portion of the disability insurance and I do as well and only the portion attributed to what my employer payed is federally taxable. So my third party sick time will be less money then I was actually paid by the state on my W-2.

[RogerD1]

Yes, you are correct.  Any amount of the insurance premiums that an employer pays or amounts that an employee pays with "pre-tax" dollars will result in taxable income for any disability payouts.

In your case, the portion of the payout related to the premium % that your employer paid will be taxable.  Your portion paid with "after-tax" money will not be taxable.

Sometimes employers will give their employees additional taxable income and use that as payment toward the disability premiums.  The advantage to the employee is that any disability payouts will be non-taxable to the employee.