Kevin (54) has not yet reached the minimum retirement age established by his employer. However, he suffered from a debilitating illness and retired on disability in 2021. While he was working, his employer paid for his disability insurance with pre-tax dollars. How are Kevin's disability pension benefits reported on his tax return?
1) Kevin's disability pension benefits are neither taxable nor reportable.
2) He should include this in the amount reported for wages, salaries, tips, etc. on line 1 of his Form 1040.
3) He should report this as additional other income on line 8z of Schedule 1, Additional Income and Adjustments.
4) He should report this as taxable pension income on line 5b of his Form 1040.