Is short term disability taxable?

Forum|Forum|3 years ago
March 26, 2023
12 replies
72 views

My W-2 has no mention of any short term disability income and my employer and the third party company they use to disburse the payments are giving me mixed answers so not sure if it is taxable or not.

TurboTax Online

MaryK4

Level 15

If you pay for the premiums yourself with taxed income, your short-term disability benefits are not taxable. In some cases, this payment may automatically be deducted from your paycheck. If your employer pays for the premiums, you must pay taxes on short-term disability.

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karmic_caboodleAuthor

Level 2

sorry if this is a stupid question but how do i determine if i paid the premiums myself? coz i was ill and office just said they would send me a check for short term disability for first few months and then CA state would be funding the other months. they never spoke of premiums.

PattiF

Level 15

If there is an amount in Box 12 with a Code J, then the short-term disability is not taxable.

Whether the payments are taxable depends on how and when they are paid. If all or a portion is taxable, the taxable portion will be reported on your W-2 that is issued by your employer, or reported on a Form W-2 issued by the insurer.

If you receive a W-2 for a third party sick pay, with no amount in box 1 for wages and the income is reported in box 12 with code of J: Non-taxable sick pay is not subject to taxation. It does not need to be reported on your income taxes. Your employer was required to generate a W2 with the figure, which is why you received it. So basically you do not need to file this return, per IRS.

Disability paid by an insurance company for things like lost wages, loss of limb, or loss of sight may or may not be taxable, depending on circumstance:

If the premiums were paid by your employer and weren't included in your taxable income, the disability is taxable
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
If you and your employer jointly paid the premiums, only the disability amount covered by your employer's payments are taxable

@karmic_caboodle

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