PURPOSE OF FORM – Form D-2440 should be used to determine and claim the correct amount of disability income exclusion. This exclusion reduces your adjusted gross income for District of Columbia income tax purposes.
Disability payments which are included and reported in your Federal Adjusted Gross Income and which qualify for the disability income exclusion on the D.C. individual income tax return should also be reported on D.C. Form D-2440 in order to compute a subtraction modification to Federal Adjusted Gross Income on your D.C. return (D-40, Part II, line 52). Taxpayers who file form D-40EZ may not file Form D-2440.
B. WHO MAY EXCLUDE DISABILITY INCOME – You may exclude disability income if you meet ALL of the following requirements:
1. You received disability pay during the tax year for which you are filing;
2. You were under the age of 65 when your tax year ended;
3. You retired on disability and were permanently and totally disabled when you retired (See Item C of these instructions);
4. On January 1, of the year for which you are filing, you had not reached the age required to retire under your employer’s retirement program; and
5. You have not notified the Office of the Tax and Revenue, (Customer Service Administration) that you chose to treat disability income as a pension instead of taking the exclusion.
5. If a taxpayer is married at the close of the taxable year, the disability income exclusion is allowed only if the taxpayer and his/her spouse file a joint return.
C. WHAT IS PERMANENT AND TOTAL DISABILITY? – You are considered permanently and totally disabled if:
1. You cannot engage in any substantial gainful activity because of a physical or mental condition; and
2. A physician determines that the condition has lasted, or can be expected to last, continuously for at least a year or more or which can be expected to result in death.
D. PHYSICIAN’S CERTIFICATION – Be sure to attach both the completed Form D-2440 and the detached physician’s certification to the Form D-40 which you file. If both husband and wife take the exclusion, each must file a Physician’s Certification. If you filed a certification for the disability in an earlier year, do not file another. Instead, check the appropriate box on Form D-2440.