How is long-term disability income reported until the taxpayer reaches minimum retirement age?

Long-term disability income is reported as wage income until the taxpayer reaches minimum retirement age because it is typically paid to replace lost wages due to an inability to work caused by a disability. This income is usually subject to income tax in the same manner as traditional earned income from employment.

When an individual receives long-term disability benefits, these often originate from an employer-sponsored plan or a private insurance policy. If the premiums for the policy were paid with pre-tax dollars, the benefits received are fully taxable as wages. Conversely, if the employee paid the premiums with after-tax dollars, the benefits would be received tax-free.

This classification is important for tax purposes, as it determines how the income is treated on the taxpayer's return. Therefore, recognizing long-term disability benefits as wage income helps ensure that taxpayers report their income accurately according to IRS guidelines.