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Lev
Lev, Tax Advisor
Category: Tax
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Experience:  Taxes, Immigration, Labor Relations
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Is California State Disbility Insurance taxable income.

Customer Question

Unemployment insurance changed to disablityinsurance when not able to look for work.
Submitted: 10 years ago.
Category: Tax
Expert:  Lev replied 10 years ago.
Do you mean insurance premium that you paid or insurance compensation paid to you?
Customer: replied 10 years ago.
Compensation I was paid. I pay into the state of Califonia Disablity Income as a required payroll deduction.
Customer: replied 10 years ago.
Relist:
Was not able to check email before the 24 hr time period had past.
Expert:  Lev replied 10 years ago.

SDI provides partial, short term wage-replacement insurance benefits to eligible workers who suffer a loss of wages when they are unable to work due to a NON Work related illness or injury, or medically disabling condition from pregnancy or childbirth. VDI is a private plan, approved by the EDD, which may be substituted for SDI. It is for California workers and is funded through employee payroll deductions. The deduction is mandatory, unless you have already met this limit.

There are only five states that provide state disability programs, California, Hawaii, New Jersey, New York, Rhode Island, and the Commonwealth of Puerto Rico. Each state or Commonwealth governs how its program is structured.

Despite this is mandatory - these deductions are not considered a taxes and not excluded from taxable income.

Benefits paid under this insurance are not taxable(unlike Unemployment Insurance benefits that are taxable).

Lev and 3 other Tax Specialists are ready to help you
Customer: replied 10 years ago.
The deduction I show on my payroll check
is CASDI is this the same as SDI. The Compensation I recieved is labeled DI for disability and UI for Unemployment. Are these the benefits that are not Taxable. If I was recieving unemployment but became disabled for a six week period is this disablity income taxable for federal taxes and not California state tax.
Expert:  Lev replied 10 years ago.

Generally, you must report as income any amount you receive for personal injury or sickness through an accident or health plan that is paid for by your employer. If both you and your employer pay for the plan, only the amount you receive that is due to your employer's payments is reported as income. However, certain payments may not be taxable to you.

Benefits paid under the disability insurance that you paid premiums are not taxable.

The tax treatment of unemployment benefits you receive depends on the type of program paying the benefits. You must include in your income all unemployment compensation you receive. You should receive a Form 1099-G showing the amount paid to you. Generally, you enter unemployment compensation on line 19 of Form 1040.

Unemployment compensation generally includes any amount received under an unemployment compensation law of the United States or of a state. It includes the following benefits:

  • Benefits paid by a state or the District of Columbia from the Federal Unemployment Trust Fund.
  • State unemployment insurance benefits.
  • Railroad unemployment compensation benefits.
  • Disability payments from a government program paid as a substitute for unemployment compensation. (Amounts received as workers' compensation for injuries or illness are not unemployment compensation.)
  • Trade readjustment allowances under the Trade Act of 1974.
  • Unemployment assistance under the Disaster Relief and Emergency Assistance Act of 1974.

If you contribute to a governmental unemployment compensation program and your contributions are not deductible, amounts you receive under the program are not included as unemployment compensation until you recover your contributions.

Customer: replied 10 years ago.
If I have further questions on this issue. Do I keep this same file.
Expert:  Lev replied 10 years ago.
Yes, you may reopen the question at the later time. You may bookmark the link to the question for your convenience.
Customer: replied 10 years ago.
According to Federal Tax Regulations
Section 1.85-1.
Disablity Insurance paid as a substitute for Unemployment Conpensation is taxable and reported as UC.
Are there any exceptions to this rule. I couldn't find these regulations. Is the DI portion taxable when I have a payroll deduction of CASDI
Expert:  Lev replied 10 years ago.

According to IRS publication 525 - http://www.irs.gov/pub/irs-pdf/p525.pdf - page 26-27:

You must include in your income all unemployment compensation you receive. You should receive a Form 1099-G showing the amount paid to you. Generally, you enter unemployment compensation on line 19 of Form 1040.

Unemployment compensation generally includes any amount received under an unemployment compensation law of the United States or of a state. It includes the following benefits:

  • Benefits paid by a state or the District of Columbia from the Federal Unemployment Trust Fund.
  • State unemployment insurance benefits.
  • Railroad unemployment compensation benefits.
  • Disability payments from a government program paid as a substitute for unemployment compensation. (Amounts received as workers' compensation for injuries or illness are not unemployment compensation.
  • Trade readjustment allowances under the Trade Act of 1974.
  • Unemployment assistance under the Disaster Relief and Emergency Assistance Act of 1974.

If you contribute to a governmental unemployment compensation program and your contributions are not deductible, amounts you receive under the program are not included as unemployment compensation until you recover your contributions. - I think this is an exception you are looking.

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