My wife received a Critical Illness Insurance check last year. What do we need to do on the NJ tax form to make it non taxable according to that rule I read about here? Critical Illness Insurance Tax Laws in New Jersey – FinsuranceGuide Also, what is the correct way to make it non taxable on the Federal return?
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In New Jersey, critical illness insurance payouts are generally not taxable and do not need to be included in your state tax return.
For Federal taxes, these payouts are also not taxable if the premiums were paid with after-tax dollars. However, if the premiums were paid pre-tax, the payout may be taxable and should be reported.
If you received a 1099-MISC for a critical illness payout and the premiums were paid with after-tax dollars, here’s how to report it correctly in TurboTax to ensure it’s treated as non-taxable income.
Entering the 1099-MISC ensures that your return matches the IRS's records, as they also receive a copy of the form. Marking it as non-taxable allows you to comply with reporting requirements while ensuring the payout isn’t incorrectly taxed.
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