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 type of insurance plan might be particularly important to you, for example, if you’re self-employed or a small business owner. This coverage is beneficial in that it protects your paycheck amount, up to certain limits, and allows you to continue to pay your monthly expenses even if you are unable to work. Disability insurance premiums range significantly based on your age, gender, occupation, income, and whether you or the employer pays. Most individuals should have some form of disability insurance coverage in place during their working years. The Social Security Administration estimates that one in every four people currently age 20 will be disabled before they reach age 67. The most recent statistics from the Federal Reserve Board suggest that 53 percent of Americans have no emergency savings that would be sufficient in covering monthly expenses should they be out of work due to a sickness or injury. The high prevalence of disability combined with a lack of savings means disability insurance is often worth the cost. What Part of Disability Insurance is Subject to Taxation? Unlike health insurance premiums, which may be considered a medical expense deduction, disability insurance is not tax deductible. This means that the money you earn that is subsequently used to pay premiums on a disability insurance policy is taxed as ordinary income.