Originally Posted by jeff216410
Thanks for the input. It seems like we are going to pay a large chunk for tax so our "tax free" LTD benefit was a waste of time. We will get their $250 tax free. The rest we pay tax to uncle sam. The $535 loss looks correct if I have to pay tax on what our daughter gets. I wonder if we should look into filing our taxes separately? I wonder if the wife has only SSDI income she may not have to pay much tax, if any... and I can use all the deductions against my income and maybe come out good? I'll have to weigh the numbers, but we are looking at having to cough up $5000 to pay the taxes on the lump sum. By right, since we paid extra to get a tax free benefit, the LTD should accept the check from SSDI minus the taxes we have to pay. That would be fair but then they would eat the $5000 in taxes which the insurance company will never do.
Yeah, that seems fair to me but insurance companies don't always play fair unfortunately. I would definitely look into filing separately versus jointly to see which one most benefits you. Sadly, the tax free LTD is independent of any other non-disability related income but SSDI is not.