Covered CA - Countable Sources of Income
Covered CA – Countable Sources of Income – Getting to MAGI and Line 37 AGI

Why are my DI benefits included as taxable compensation?

According to the IRS, DI [Disability Income] benefits that are considered a substitute for UI [Unemployment Insurance] are taxable. Federal Tax Regulation Section 1.85-1 states that DI benefits are considered to be in the nature of UI benefits when paid to an unemployed taxpayer who is ineligible for UI benefits solely because of the disability.

Your DI benefits are taxable only if you receive DI benefits in place of Unemployment Insurance (UI) benefits. In this case, your DI benefits are considered a substitution for your UI benefits, which are taxable. Learn More ⇒edd.ca.gov/

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.  Learn More ⇒  edd.ca.gov/

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2 comments on “SDI State Disability Benefits Taxable?

  1. I was told by covered California that they only count the AGI when you are self employed we have a pension and are on Social Security disability is only part of that taxable covered California considers it all taxable amount because they say they are considering the whole thing. I thought they only went by your adjusted gross income no matter whether your self employed disabled or working

    • I’m on vacation, so I can’t give you all the details and links. Please use the menu above and find the definition of MAGI income. It’s not the same as AGI line 37, there are things like Social Security that get added back in. See the menu here:

      http://taxcredits.healthreformquotes.com/quotes-subsidy-tax-credits/magi-modified-adjusted-gross-income-line-37/magi-faqs/

      And see what the treatment is for Social Security payments and pensions.

      If you send me a private email with all your tax documents, I can review them on the 30th when I’m back in town.

      You can also go into your Covered CA account and appoint us as your agent, no extra charge, so that we get paid to help you. Along with authoritative answers and citations to the law or actual insurance company rules.

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