Disability benefits from the Disability Income Plan of North Carolina (DIPNC) are subject to federal income tax. Each year in January, we issue a Form W-2 (Wage and Tax Statement) rather than a 1099-R since disability benefits are considered a “Sick Pay Plan” for federal tax purposes. However, the reportable amount does not represent earned income for work performed by you. The Form W-2 shows your total gross amount of the DIPNC benefit for the calendar year, the amount of tax withheld (if any), and other related information.

If you are a North Carolina resident and have maintained five or more years of service as of August 12, 1989, your benefits are not subject to North Carolina income tax. If you do not have five years as of August 12, 1989, the taxable portion of your benefit is subject to North Carolina income tax.