Disability Benefits

I received a 1099-misc from the insurance company that pays my monthly disability benefit. The benefits are not taxable because I paid the premiums for the disability ins

urance myself. But, since I have a 1099-misc, I feel obligated to report it. The problem is that there is no way in TurboTax Deluxe to report the 1099-misc without TurboTax treating it as taxable income. I can use the override function to exclude the benefit amount from being included in taxable income, but do I even need to report the 1099-misc at all since the benefits are not taxable to start with? Am I missing something? Suggestions?

503

Expert Alumni

Mar 21, 2020 12:29:41 PM

If you paid the premiums out of your own pocket or with payroll deductions that came out of your after-tax income, the disability isn't taxable.

One way to offset your 1099-Misc income is to enter an equal amount as a negative number.

Here is how to enter a negative number on line 8 of Schedule 1 under other income:

Select 'Less Common Income'
Then select 'Miscellaneous Income'
Then select 'Other reportable income'
The next screen will ask if you had 'Any Other Taxable Income?' Select Yes.
The next screens will ask for a description and the amount.
Enter the amount as a negative number, and the amount will be reported on on line 8 of Schedule 1

You should also enter your 1099 income the same way as a positive number to avoid being charged self employment tax on the income.

Returning Member

Mar 21, 2020 1:00:05 PM

Thanks. I've closed out of TurboTax, but will follow your suggestion when I startup tomorrow. Thanks again.

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Disability Benefits