 Dear Tax Talk:
I am permanently disabled beginning this tax year (2007), and can't work. I will be receiving income from a private disability insurance policy, as well as Social Security disability benefits. Does the IRS or the state of Georgia require taxes to be paid on this income? It's not workers' compensation. If taxes are required, are tax credits or any special treatment given to this income? Thanks in advance.
-- Gaines
 Dear
Gaines,
Amounts you receive under a private disability policy are not taxable to you. If your employer had paid the premiums, then the disability income would be taxable, except in the case of workers' compensation benefits.
If your plan reimbursed you for medical expenses you deducted in an earlier year, you may have to include some, or all, of the reimbursement in your income.
Similarly, if the plan pays for
medical expenses, you cannot deduct those costs.
For example, if the plan pays $100 per day for
nursing care, you cannot deduct up to $100 of
nursing care.
Social Security benefits are taxable
income if your modified adjusted gross income
exceeds a certain threshold. Social Security benefits
include monthly retirement, survivor and disability
benefits. They do not include supplemental security
income, or SSI, payments, which are not taxable.
To find out whether any of your benefits may be taxable, compare the threshold for your filing status with the total of one-half of your benefits, plus all your other income, including tax-exempt interest.
You would not include your disability
payments as income, as they are not taxable. Your
threshold depends on your filing status.
 |
Disability tax threshold: |
|
|
| • |
$25,000
if you are single, head of household,
or a qualifying widow(er). |
| • |
$25,000 if you are married filing separately
and lived apart from your spouse for
all of 2007. |
| • |
$32,000 if you are married filing jointly. |
| • |
Zero
if you are married filing separately
and lived with your spouse at any time
during 2007. |
|
Generally, states follow federal rules in determining what is considered taxable income. If your only income comes from the private disability policy and Social Security benefits, you would owe no taxes.
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