There is no doubt that taxes and LTD coverage can be confusing, so you should discuss these issues with a long-term disability attorney. Tax Information - Resources - Illinois Disability benefits replace lost income. If the income is paid directly to you by your employer, its taxable to you just as your ordinary salary would be. Get in Touch with Us: Report Ocean: Email:sales@reportocean.com Address: 500 N Michigan Ave, Suite 600, Chicago, Illinois 60611 - UNITED STATES Tel:+1 888 212 3539 (US - TOLL FREE) Website:https . This amount is paid in a lump sum, and it can be substantial. But if you're filing as an individual with provisional income between $25,000 and $34,000, up to 50% of your disability benefits are considered taxable income. Report the amount you receive on the line "Total amount from Form(s) W-2, box 1" on Form 1040, U.S. Read our, How To Calculate Your Illinois Income Tax, States That Allow You to Deduct Federal Income Taxes, Illinois Income Tax Agreement With Bordering States, How To Prepare and File Your State Tax Return, States With Flat Income Tax Rates for Tax Year 2022, Reduce Your Taxable Income: Tax Deductions and Tax Credits, New York City Income Tax Rates and Available Credits, Determining Adjustments to Income on Your Tax Return. "Add-backs" are sources of income that aren't included in your federal AGI but are taxable in Illinois, such as federally exempt interest income. To find out if some of your benefits may be taxable, add 50 percent of your annual disability payments to your other income.If the total is over $25,000 and you file as a single person, at least 50 percent of your Social Security disability benefits may be taxable, and you have to report the taxable amount on your tax return.If you file a joint return with your spouse, the limit is $32,000 . (Notice that Line 6 of the form allows you to withhold only 7%, 10%, 15%, or 25% of your monthly benefit.). If you and your partner's total income exceeds $44,000, as much as 85% of your SSDI benefits may be taxed. If AGI plus half of SSDI is over the base amount, up to 50 percent of the SSDI can be taxable. Box 1 is the total benefit amount you received during the last calendar year.