NDI - Non Industrial Disability Insurance

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My wife doesn't pay into, or is covered by State Disability Insurance (SDI), she is covered by Non-industrial Disability Insurance (NDI). There is no tax to pay into NDI. She is going on maternity leave and will be receiving NDI.

I am trying to do tax planning and I cannot find out if NDI will be considered taxable income (Fed tax purposes). 

Does anyone know anything about NDI and whether or not it is considered taxable income? Anyone have any sources?

Thanks in advance!

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From the IRS:

"~~Question:  Is the long-term disability I am receiving considered taxable?Answer:You must report as income any amount you receive for your disability through an accident or health insurance plan paid for by your employer (emphasis added)"

However, take a look at point three:

"~~•If you pay the premiums of a health or accident insurance plan through a cafeteria plan, and you did not include the amount of the premium as taxable income to you, the premiums are considered paid by your employer, and the disability benefits are fully taxable."

In other words, it sounds like this will be taxable since your wife paid with pre-tax dollars.



Well neither the employer nor the employee pay into premiums for this insurance. I know with 100% certainty that the employee does not pay into it. Looking at the pay stub I don't see that the employer makes a contribution.

Is this the NDI your talking about?


It was unclear when you said "there is no tax to pay into NDI" whether you meant that your wife was paying for this with pretax dollars (money paid but not taxed) or whether there was no additional cost to her for this insurance.  Regardless, if she's not paying the premiums I think the income will be taxable.  Specifically, the link I provided earlier, mentions that payments received from  "a state sickness or disability fund" is taxable income.

Of course, consult you own expert.


Yes, that is the NDI I am referring to.

What I meant about "there is no tax to pay into NDI", is that there is no deduction from her paycheck. I think it will be taxable, but it is hard to decipher in the IRS code.

If she pays nothing for it, then its a benefit provided by her company I would assume. In such case its taxable.

Disability insurance non taxable IF paid with after tax dollars. Since this isn't the case, it will be taxable income.

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