Social Security Disability, how to deduct transferred funds to Long Term Disability Insurance Company?

[Matus]

Receiving Long Term Disability from insurance company, which was post taxed, so I shouldn't have to pay taxes on the funds.   But the LTD Co. made me apply for Social Security Disability, which was approved.   The LTD Co. reduced their payments to me, at the SS rate.    In prior years I could easily deduct the amount returned to the LTD co., but now in 2018 the deductions are capped, and I can't determine how to deduct the SS amounts, which are reported on a SSA-1099.    How do I change/deduct the SSA amount from my taxes?    

[NCperson]

wait - maybe not following

the SS payments are taxable, so you report what is on the SS_1099.

but the LTD company payments are not taxable so it's not on your taxes.  and the repayment isn't to be on your taxes either.  

https://ttlc.intuit.com/questions/3510465-is-my-social-security-disability-taxable

the entire SS disability payments are subject to tax - are you thinking they are not? see the link provided 

[Matus]

The amount given to the LTD should not be taxed.  But because of the new tax deduction laws, the amount is getting taxed.   Let me show you the scenario:

Total Disability.   The LTD insurance was paid after taxes, so any amount paid to me is not taxed.   Lets say $50,000 a year.

The LTD company, made me apply for SS disability, or they would cancel my policy.   It was approved, and SS pays me $30,000 a year.

So now the LTD insurance co., reduced the payments to me by $30,000 a year, giving me only $20,000 a year.

In 2017 the taxes were:

$30,000 in SS disability

$20,000 in LTD

Tax deduction of $30,000 to match the SS disability, as reduced by the LTD.

This made the entire $50,000 tax free.

In 2018, the max deductions are $24k, so now when I try to deduct the $30,000 from SSD, I am showing that I have to pay the taxes.   I also have an addition $25,000 already in other deductibles (medical, prop. taxes, schools, etc.).

The SSD $30,000 should not be taxed.   How do I put it on my taxes, without paying the taxes on it?   The LTD co. will not assist, as they don't want to pay the taxes either.

[NCperson]

can we take a step back a little bit and discuss some fundamental assumptions you are making? (if we can't, please don't read the rest of this!)

1) Why are you putting the LTD payments on your tax forms?  As you have stated they are tax free!  see the commentary from Turbo Tax expert at this link.   The LTD payments do not belong on the tax form (assuming you paid the premiums which means they are tax free).

https://ttlc.intuit.com/questions/4195892-my-federal-income-is-disability-and-non-taxable-where-do-i...

2) why do you think the SSD is tax free? is that your opinion or do you have something you read from a verified source that states that it is so?  From the Turbo Tax commentary below, you are to enter the SS disability income and in some cases it is taxable but in most cases it is not. 

https://ttlc.intuit.com/questions/3510465-is-my-social-security-disability-taxable

3) do you have any other income? if not, then there is no tax due in any event because your income is too low.  The deductions don't matter. But you still have to show the SSD income in Turbo Tax so that Turbo Tax can figure that out! 

4)   if you have a lot of other income (dividends, interest, stocks, etc), then the SSD could be taxable depending on the total income picture- there is simply no way around that. Key it the other non-LTD income by following Turbo Tax's advice.  You are not going to 'deduct' the LTD payments (because they shouldn't be on your tax forms in the first place. You are not going to deduct the SS disability payments, because those are not qualified deductions. 

The reason you are struggling to figure out how to deduct the SSD payments in Turbo Tax is because that is not how the IRS rules work! 

does any of this help? the SSD payments 'should not' be taxable, but only based on what your other non-LTD income looks like.  Otherwise, it is taxable - again, where did you read or why did you think it was not taxable?    

[Matus]

Hi,

Thank you for your time.

1) I am not reporting the LTD funds on my taxes.   They are not taxable, and no forms are received.

2) I do get a SSA-1099, and put that in Turbo Tax.   

3) According to the Tax Lawyers from the LTD, since the SSA disability funds reduce the funds from the LTD, they should be deducted from taxable income.   In prior years, I was instructed to use Misc. Itemized Deduction, Schedule A Form 1040.

4) My spouse works, so we have joint tax statements, and a net taxable income.

5) In 2018, the limit appears to be $24k in deductions.    With my other deductions, I am way over that limit, and my taxes have increased by $4k.

How can the SSA disability amounts be deducted?   This $ really went to the LTD company to reduce their payments to me.

[NCperson]

I do not see any instructions in the IRS library where these SSDI payments are deductible. 

In fact, i would be concerned that they were deductible in prior years either.   Do you have any written advise stating so?  How many years were you declaring that as an itemized deduction (and presumably only above 2% of your AGI???)

Effectively all the misc. deductions have been eliminated with tax reform, in any event

if you google "SSDI taxable" there are plenty of well known website that state that it is taxable, but under the presumption that the disability payment is your only form of income (which I appreciate in your case, it is not), there would be no tax liability. 

https://www.irs.gov/pub/irs-pdf/p529.pdf

As I stated earlier, i suspect the reason you are struggling to figure out how to deduct the SSDI payments in TT is because they aren't deductible.