New Jersey residents may be unable to work for various reasons during their earning years. Temporary and permanent disability programs exist to pay benefits during these times. These programs are treated differently for tax purposes. Some of these programs are subject to New Jersey taxes and others, like temporary disability benefits, are taxable at the federal level.
New Jersey disability income and unemployment benefits are not taxed on the state level. However, Social Security disability benefits may be taxable depending on whether or not you received other income in addition to your disability payments, and if you filed joint taxes.
NJ Disability Payments and Taxes
In New Jersey, temporary disability benefits are treated in the same manner as third-party sick pay. If you receive these types of benefits, they are subject to Social Security withholdings. At the end of the year, you will receive a W-2 listing the amount of sick benefits received, since they are taxable under federal law.
Unemployment Insurance benefits and Disability During Unemployment benefits are taxable under federal income tax laws. Since there isn’t a disability tax exemption in this case, you will receive a 1099 Form that shows you the amount of the taxable income you need to include for the year.
New Jersey Disability Tax Exemptions
Unemployment Insurance benefits are not taxable at the state level. You may be wondering, "Is my NJ disability pension taxable?" There is an NJ pension exclusion making temporary disability payments nontaxable under state law.
SS Disability Income and Quarterly Payments
If you had to pay income tax on your Social Security disability benefits for any given year, you can decide to make quarterly payments to the Internal Revenue Service (IRS) to lower your tax burden for. When you make estimated quarterly payments, you are paying ahead of time on what you expect to owe. Any excess will be given back to you in the form of a refund. You also have the option of having federal income tax deducted directly at the source.
SS Disability Income Taxes 2018
A portion of your Social Security income may be taxable. To determine if some of the disability benefits you received were taxable, you would need to add the total amount of disability income you received as well as your other income. The higher your total income, the greater the likelihood you will need to pay tax on a portion of your disability benefits.
In most instances, up to half your benefits are taxable. However, if either of these situations apply to you, up to 85 percent of your benefits can be taxed:
- The total of 50 percent of your benefits plus all other income equals more than $34,000, if you are filing singly, and $44,000 if you are married and filing jointly; or
- You are married filing separately and lived with your spouse at any point during the year.
If you have questions or concerns about New Jersey taxes and disability payments, contact the agency issuing the payments. An income tax professional should also be able to help you.
- NJ Dept of Labor and Workforce Development: Tax reporting requirements for Temporary Disability and Unemployment Insurance
- Social Security Administration: Benefits Planner | Income Taxes And Your Social Security Benefit
- IRS Publication 915: Social Security and Equivalent Railroad Retirement Benefits
- The Motley Fool: Social Security Tax Calculator – Are Your Retirement Benefits Taxable?
Jodee Redmond is a freelance writer, blogger and editor who has been working full-time in this capacity for over 15 years. She is a graduate of Centennial College and has worked as a tax consultant and a legal assistant. Her previous experience and boundless curiosity is a distinct advantage when writing about such varied topics as income tax, insurance, commercial property, business, construction, addiction, freelance writing and more.