Why are my Disability Insurance (DI) benefits included as taxable compensation?
According to the IRS, DI benefits that are considered a substitute for Unemployment Insurance (UI) are taxable. Federal Tax Regulation Section 1.85-1 states that DI benefits are considered to be in the nature of unemployment compensation when paid to an unemployed taxpayer who is ineligible for unemployment compensation solely because of the disability. If you leave work because of a disability and receive disability benefits, those benefits are not taxable. However, if you are receiving unemployment benefits, become disabled, and begin receiving disability benefits; those DI benefits are considered a substitute for UI and are taxable up to your UI maximum benefit amount.
Related Questions
- Am I allowed to receive both Workers Compensation benefits and/or Social Security Disability Insurance and MainePERS disability benefits?
- May I collect workers compensation, unemployment or other disability insurance while receiving SSDI benefits?
- Why are my Disability Insurance (DI) benefits included as taxable compensation?
