Title: Is Disability Insurance Tax Deductible? | LendEDU
Headings: Is Disability Insurance Tax Deductible?
Is Disability Insurance Tax Deductible?
Melissa Horton
What is Disability Insurance?
What Part of Disability Insurance is Subject to Taxation?
What Part of Disability Insurance is Not Subject to Taxation?
Bottom Line

Content: This is because disability insurance premiums are paid with after-tax dollars, so you have no burden to pay taxes again when you receive payments from a policy. The fact that disability insurance premiums are tax-free is incredibly helpful if you need to go on claim. Disability income insurance payouts range from 50 percent to 80 percent of your income, depending on the insurance provider you select and the amount of coverage you put in place. This is different from life insurance, for example, which pays out a lump sum death benefit in the event of the insured person’s passing. Because this is a smaller amount than you are used to living off of, not having an additional tax burden on top of a reduced income is helpful. The hope is that monthly obligations can still be covered while you are on disability, helping you and your loved ones avoid financial hardship. Bottom Line
Disability insurance is an essential component of a sound financial plan for many individuals and families. Having the right coverage in place means that you can worry less about disability due to sickness or injury in the future that would keep you from earning a steady paycheck. However, it is important to understand how disability insurance premiums are paid and how benefits are received. You cannot take a tax deduction for disability insurance premiums paid each year, so there is no upfront tax benefit to you.