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Tax Law (Questions About Taxes)/Is Disability Insurance taxable in New Jersey?


I reside in New Jersey and worked there for 20 years until July, 2012, when the company outsourced my job and terminated my employment. I collected unemployment insurance and shortly thereafter applied for disability insurance. Negotiating my severance package took several months and I finally received a check in February, 2013, which was taxable income on my 2013 Federal and New Jersey personal tax return. I then qualified for the company's disability insurance which was with a private insurance company. The company paid the entire premium. I received disability benefits for 2 years, January, 2013 through December, 2014. When that disability ended,I then qualified for Social Security disability benefits, beginning in January, 2015,which I now continue to receive. I received a W-2 from my former employer for the salary I earned in 2012 and a W-2 from them for the severance package I received in 2013. I included all these amounts on my Federal and New Jersey tax returns. In 2013 and 2014 I received W-2's for the disability income I received from this private company. The only box that contained an amount was Box 1, Wages, etc. All the other boxes, included Boxes 15-17, State information, were blank. My question is: Are the disability benefits I received from this private company in 2013 and 2014 taxable on my my New Jersey income tax return (Form NJ1040)? Any information you can provide would be greatly appreciated. Thank you.


Thanks for your question.

When you picked a state to live in, you chose well for your situation. The state of NJ does not tax disability benefits, even if subject to federal tax. Also, just in case you didn't know, social security benefits are not taxable in NJ.

Hope this helps.

John Stancil, CPA

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John Stancil, CPA


I can answer questions on personal income taxes, partnerships, and some corporate income taxes. I can deal with some state tax questions. Limited gift and estate tax questions. I am also familiar with ministerial and church tax reporting issues. I am Professor Emeritus at Florida Southern College. Sales taxes and property taxes are state and local issues so I am not likely be be able to give you an in depth answer on those types of taxes. I have maintained a CPA practice, specializing in tax, for over 35 years. I am a member of the National Association of Tax Professionals, The Florida Insititute of CPA's, The NCPE Fellowship. In addition I am a Certified Mentor for SCORE. Visit my website at I also offer seminars and consultations to churches and clergy on their tax issues at Also visit my blog, I am listed on Tax Connections at Prepare and file your own taxes at


I hold a doctorate in Accounting, and am a CPA. My certifications of CIA, CFM, and CMA are inactive. I passed all certification examinations on the first attempt, and received honorable mention for my scores on the CIA exam. I have operated a CPA firm for over 37 years and have taught accounting and tax at the college level for over 35 years.

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