Form IT-221: Disability Income Exclusion (2026)

Last reviewed: 2025-10-29

Use the New York Tax Form Calculator Form IT-221 — Disability Income Exclusion as a stand alone tax form calculator to quickly calculate specific amounts for your 2026 New York state tax return. Alternatively, you can use one of our Combined Federal and State Tax Estimators to quickly calculate your salary, tax, and take-home pay.

Form IT-221 allows eligible New York taxpayers to exclude part or all of their disability retirement payments from New York taxable income. The exclusion applies to payments that would have qualified under the former federal exclusion rules in IRC §105(d), as in effect before 1984. The maximum combined exclusion for disability income and pension or annuity income is $20,000 per individual (or per spouse if filing separately).

This form is filed with your IT-201 (full-year resident) or IT-203 (part-year/nonresident) return. The allowed amount is entered as a subtraction modification on IT-225 line 10 (code S-124).

1. Who qualifies: You must have retired on disability and be permanently and totally disabled, as certified by a physician. The exclusion is not available if you have reached age 65 or are working full-time in competitive employment.
2. Eligible payments: Only disability payments received because of permanent and total disability qualify. Payments under ordinary pension or annuity plans are excluded unless you retired specifically due to disability.
3. Exclusion limit: The combined total of your disability income exclusion plus any pension and annuity income exclusion cannot exceed $20,000 per individual.
4. Residency rules: Part-year residents must allocate the exclusion based on the period of New York residency. Nonresidents may only exclude income attributable to New York sources.
5. Documentation: Retain a copy of your disability retirement award, physician certification, and proof that the income qualifies as disability pay. If requested, you must show that your disability payments would have been excludable under the pre-1984 federal rules.

How to Calculate the Exclusion

List the total disability income received for the year in Columns A and B on Form IT-221 (for you and your spouse). Use the worksheet in the form instructions to calculate the excludable portion. Then compare the computed amount to the $20,000 limit—whichever is lower becomes your allowable exclusion. Enter the result on your main return as a subtraction modification.

Example: You retired on permanent disability and received $16,000 during the year. You did not claim any pension or annuity exclusion. Since your total is below $20,000, you can exclude the full $16,000 on your IT-225 line 10.

If you also receive pension income, combine both exclusions and apply the $20,000 ceiling. For instance, $12,000 disability + $10,000 pension = $22,000; only $20,000 may be excluded. Allocate proportionally if filing jointly.

Taxpayers who return to substantial employment or fail to maintain disability status may lose eligibility. Keep medical and employer documentation verifying your continued qualification.

Planning & Compliance

Plan the timing of your retirement and payment classification carefully. Only payments attributable to disability retirement qualify. If your employer converts your plan to a standard pension, new payments may no longer be excludable.

Ensure that your Form IT-221 matches data reported on your IT-225 and main return. Errors in cross-referencing lines or overstating the exclusion are common reasons for audit adjustments.

Keep all supporting documentation—medical certifications, award letters, and payment statements—for at least three years. Clear evidence of disability status and payment source is essential to maintain eligibility under audit.

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Important Notes

All calculations are estimates for guidance only. Always review your return and consider professional advice when submitting official filings.