Form IT-221: Disability Income Exclusion for Tax Year 2025 (New York State)

Form IT-221, Disability Income Exclusion, is a New York State tax form used to figure out how much of your disability income can be excluded from your New York taxable income. It’s issued by the New York State Department of Taxation and Finance and applies to tax year 2025 filings. If you retired on disability and received payments that count as wages under your employer’s accident or health plan, this form helps you calculate the portion of that income you don’t have to pay state tax on.

The federal government used to allow a similar exclusion, but that federal break was phased out years ago for most taxpayers. New York, however, kept its own version of the disability income exclusion at the state level. That’s why Form IT-221 still exists even though you won’t find an equivalent line on your federal return anymore. Anyone claiming this exclusion needs to complete IT-221 and attach it to their New York State income tax return.

Who Needs Form IT-221

You may need this form if you meet all of the following conditions: you retired on disability before the end of the tax year, you were permanently and totally disabled when you retired, and you received disability retirement payments that your employer reported as wages. If any of these don’t apply to you, you likely don’t qualify for the exclusion and won’t need to file this form.

It’s also worth noting that this exclusion has income limitations built into the calculation. The form walks you through comparing your disability income against a base amount, and if your adjusted gross income exceeds certain thresholds, the exclusion gets reduced. So even if you technically qualify, the actual dollar amount you can exclude might be smaller than you expect, or in some cases reduced to zero.

When to Use IT-221

You’ll use Form IT-221 when preparing your New York State personal income tax return for the year in which you received qualifying disability retirement income. It’s not a standalone filing — it’s a supporting schedule that feeds into your main state return. If you’re filing Form IT-201 (Resident Income Tax Return) or IT-203 (Nonresident and Part-Year Resident Income Tax Return), you’ll reference the calculated exclusion amount from IT-221 on the appropriate line of that return.

Keep in mind this is separate from other New York modification forms. For example, if you’re also dealing with adjustments related to state modifications more broadly, you might end up cross-referencing something like Form IT-225, which covers a wider range of New York-specific additions and subtractions to federal income. The disability income exclusion is just one piece of the puzzle if your tax situation involves multiple adjustments.

How to Get and Fill Out the Form

Form IT-221 is available directly from the New York State Department of Taxation and Finance as a fillable PDF, meaning you can type your information directly into the form fields on your computer before printing it or attaching it to an electronic filing. This AcroForm setup makes it easier to keep your entries legible and reduces errors compared to filling it out by hand.

To complete it, you’ll need documentation showing your disability retirement payments for the year, typically from a 1099-R or similar statement from your pension or annuity provider. You’ll also need your adjusted gross income figures to run through the income limitation calculation built into the form. Follow the line-by-line instructions carefully since the exclusion amount depends on a formula rather than a flat deduction.

Once you’ve calculated your allowable exclusion, transfer that figure to the corresponding line on your IT-201 or IT-203. Retain a copy of IT-221 with your tax records in case the Department of Taxation and Finance requests supporting documentation later.

If you’re a business owner or self-employed individual navigating multiple New York tax credits and exclusions in the same filing season, it may help to review related guidance such as Form IT-223 for innovation-related deductions, or even out-of-state resources like the FTB Form 914 if you also have California tax matters to resolve. Keeping track of which forms apply to your specific situation makes filing season considerably less stressful.