LTD (Long Term Disability) and MAGI Questions

[DatumPoint5]

When I left my company earlier this year, I used my eligibility for LTD (Long Term Disability) to transition into retirement. I went through a short period of collecting STD (Short Term Eligibility), but, now that I am on LTD (Long Term Disability) for the foreseeable future, the payments are much larger, and I am concerned whether or not the payments will be "taxable" at the end of the year.

Does anyone have any experience or insight into ......

• how Long Term Disability (LTD) payments are handled for tax purposes at the end of the year?
• Are they "reportable" on my 1040?
• Will the whole payment that I receive each month be taxable and count
  towards my MAGI?

The answer to these questions, I believe will be hugely important as I plan for using the ACA for Health Insurance going forward. Currently, I am on Cobra, but, that will be "gone" next year, and as I think about my options, this problem of not really knowing what my MAGI will be next year and into the future is perplexing me.

Any help and/or advice would be greatly appreciated. Thanks!

 

[SevenUp]

See Life Insurance & Disability Insurance Proceeds 1 | Internal Revenue Service. Did that give you enough information for your first two questions?

The answer to the third question is the same as whether your particular LTD payments are taxable. See MAGI for Affordable Care Act purposes.

 

[DatumPoint5]

Thanks for the quick response! My quick review of those documents, tells me a lot about SSDI, which is a different and separate issue. I am looking for info on the treatment of LTD insurance payments And not anything to do with SSDI and/or Medicare and/or Medicaid.

I will continue to peruse through those websites for more info, but, so far, nothing focuses on what I believe just about every employee was automatically signed up for, which is STD and LTD, and how the payments are treated..........

Thanks for the quick response. If anyone else has anything to add, please do so...... thanks!

 

[Sarah S]

Who paid the premiums? If your employer did then the ltd is taxable. If they paid part and you paid part the percentage they paid for is taxable. At least this is what I was told. And if you paid it should have been with after tax dollars

 

[SevenUp]

Thanks for the quick response! My quick review of those documents, tells me a lot about SSDI, which is a different and separate issue. I am looking for info on the treatment of LTD insurance payments And not anything to do with SSDI and/or Medicare and/or Medicaid.

I will continue to peruse through those websites for more info, but, so far, nothing focuses on what I believe just about every employee was automatically signed up for, which is STD and LTD, and how the payments are treated..........

Thanks for the quick response. If anyone else has anything to add, please do so...... thanks!

Where are you seeing SSDI info?

The Life Insurance & Disability Insurance Proceeds 1 | Internal Revenue Service page notes "You must report as income any amount you receive for your disability through an accident or health insurance plan paid for by your employer," but if you paid for the insurance then the benefits aren't taxable.

 

[Dtail]

If you qualify for LTD, can't you potentially qualify for Medicare before 65 y.o.?

 

[DatumPoint5]

My employer paid 20 percent and I paid 80 percent (after tax dollars) over a 34 year period. I think my consternation with this issue is that I can’t seem to get any guidance on what will happen at the end of the year as far as what kind of document the insurance company will send so I can “break it down” into an 80/20 split. Is it a document that “shows the split”? What line number on the 1040 does it get reported? Is it a different tax form altogether “attached” to the 1040?

I am looking for anyone who has had exposure to this issue. Maybe you can tell me what form is going to be sent to me..... Or what form I will need to send to the IRS. 1099Misc? 1099Other?

 

[DatumPoint5]

If you qualify for LTD, can't you potentially qualify for Medicare before 65 y.o.?

No. That would be available to me if the subject was BEING ON SSDI. HOWEVER, I am not on SSDI, I am on LTD.

 

[DatumPoint5]

Where are you seeing SSDI info?

.

I saw SSDI mentioned in your link when I clicked one of the embedded links that went into detail of what should be included in magi.......

 

[SevenUp]

...I can’t seem to get any guidance on what will happen at the end of the year as far as what kind of document the insurance company will send....

It depends on what form the LTD payments take. E.g., they could be a disability pension in which case you would get a 1099-R with code 3 in box 7. Someone in your employer's benefits department should know - the trick may be in finding that someone.

 

[DatumPoint5]

My thanks to everyone...... All of the comments made are greatly appreciated!!!