Specific Instructions
General Instructions
Line 1 – Fill in the amount of disability pay included in your federal
A. Purpose of Schedule – Persons who receive disability income may
be able to exclude a portion of it from their taxable income. Complete
adjusted gross income, less any amount that is otherwise exempt
this schedule to determine the amount, if any, of your exclusion.
from Wisconsin tax (for example, retirement payments received from
the U.S. government that relate to service with the Coast Guard,
B. What is Disability Income – Generally, disability income is the
the commissioned corps of the National Oceanic and Atmospheric
total amount you were paid under your employer’s accident and health
Administration, or the commissioned corps of the Public Health
plan or pension plan instead of wages for the time you were absent from
Service).
work because of permanent and total disability. However, any payment
you received from a plan that does not provide for disability retirement
Lines 2a and 2b – You can exclude either your actual weekly
is not disability income.
disability pay or $100 a week, whichever is less. The following table
shows how to figure your weekly disability pay.
C. Who Can Exclude Disability Income – You can take the
exclusion for 2013 if you meet ALL these tests:
Your weekly pay is the following part of what
Pay period
you receive each pay period
• You received disability income which is not otherwise exempt from
Weekly . .............. All
Wisconsin tax.
Every 2 weeks . ... Half
• You were not yet 65 when your 2013 tax year ended. (If you were
Twice a month ... Multiply your pay by 24, and divide the result by 52
born on January 1, 1949, you are considered to be age 65 at the end
Each month . ....... Multiply your pay by 12, and divide the result by 52
of 2013.)
Other . ................. Divide your yearly pay by 52
• You retired on disability and were permanently and totally disabled
Line 2c – If you received disability pay for part of a week, follow
when you retired. (See Instruction D, What is Permanent and Total
the steps below.
Dis a bility? and instructions for Physician’s Statement.)
• On January 1, 2013, you had not yet reached the age when your
Step 1. Divide $100 by the number of days a week you normally
em p loyer’s retirement program would have required you to retire.
worked before you retired.
• You did not in any year prior to 1984 choose to treat your disability
Step 2. Divide the disability pay you received by the number of days
income as a pension instead of taking the exclusion.
it covered in that week.
• If you were married at the end of 2013, you must file a joint return.
Step 3. Compare the Step 1 and Step 2 amounts. The smaller amount
• You were a Wisconsin resident when you received the disability
is your daily rate. Your exclusion for the week is based on it.
income.
Step 4. Multiply your daily rate by the number of days you received
disability pay in the short week. The result is your exclusion for that
If you meet these tests, you can take the exclusion until the earliest of
the following dates:
week.
(1) The first day of the tax year in which you turn 65. (If you were
Step 5. Add your exclusion for that week to your exclusion for any
born on January 1, 1949, you are considered to be age 65 at the
other short weeks. Fill in the total on line 2c.
end of 2013.)
Disability payments are made for part of a week when one of the fol-
lowing happens after the first day of the taxpayer’s normal workweek:
(2) The day you reach the age when your employer’s retirement
(1) The disability retirement begins.
program would have required you to retire.
(2) The disability retirement ends because the taxpayer reaches
D. What is Permanent and Total Disability? – A person is
required retirement age.
permanently and totally disabled when:
(3) The taxpayer dies.
• He or she cannot engage in any substantial gainful activity because
Line 5 – Generally, the most a person can exclude is $5,200. This
of a physical or mental condition; and
exclusion goes down, dollar for dollar, by any amount over $15,000
on line 5a.
• A physician determines that the condition (1) has lasted or can be
expected to last continuously for at least a year; or (2) can be expected
Generally, no exclusion is left if line 5a is –
to lead to death.
• $20,200 or more, and one person could take the exclusion.
• $25,400 or more, and both husband and wife could take the
An activity is considered substantial if it consists of duties that are
exclusion.
more than those of a nonproductive, make-work nature. An activity is
considered gainful if it pays at a rate at or above the minimum wage.
Physician’s Statement – If you did not check the box on line 9 of
The examples below show substantial gainful activity. In such cases,
Schedule 2440W, you must have your physician complete a statement of
the disability income exclusion cannot be taken.
permanent and total disability. You can use the statement on Schedule
2440W for this purpose. However, if you are filing federal Schedule R
Example 1: Sue, who was a sales clerk, retired on disability. She now
and your physician completed a Physician's Statement for use with that
works as a full-time babysitter at the minimum wage. Although Sue does
form, you may submit a copy of that statement instead of completing
different work, she babysits on ordinary terms for the minimum wage.
the physician's statement on Schedule 2440W.
She cannot take the exclusion because she is engaged in an activity that
is both substantial and gainful.
If both husband and wife take the exclusion, each must file a state-
ment.
Example 2: Mary, president of the XYZ Corporation, retired on
If you retired on disability before January 1, 1977, the physician’s
disability because of terminal illness. On her doctor's advice, she works
statement must show that you were permanently and totally disabled
part-time as a manager and is paid more than the minimum wage. Her
on January 1, 1976, or January 1, 1977.
employer sets her days and hours. Although Mary’s illness is terminal
If you retired on disability after 1976, the physician’s statement must
and she works part-time, the work is done at her employer's convenience.
show that you were permanently and totally disabled when you retired.
She is considered engaged in a substantial gainful activity and cannot
take the exclusion.
If the Department of Veterans Affairs (VA) certifies that you are
permanently and totally disabled, you can file VA Form 21-0172 instead
of the physician’s statement. VA Form 21-0172 must be signed by a
person authorized by the VA to do so. You can get VA Form 21-0172
from your local VA regional office.
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