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What is a Long-Term Disability Insurance Premium?
The cost of long-term disability insurance varies greatly based on several factors, including your age, sex, occupation, health, and lifestyle choices with respect to the amount of coverage you require. These premiums can be anywhere from 1% to 3% of your annual income on average each month for long-term disability insurance.
If you make $50,000 per year but choose a long-term disability insurance policy that will pay 60% of your income if you become disabled, expect to pay anywhere from $50 to $150 per month in premiums.
Are Long-Term Disability Insurance Premiums Tax-Deductible?
Whether or not long-term disability insurance premiums are tax-deductible depends on how the policy is paid for.
But, if the policy is paid for with pre-tax dollars (e.g., employer group benefits through which the premiums are deducted from your paycheck before income taxes), that same one-year waiting period does not apply. If so, the premiums could be deductible.
If the premiums are paid beforehand with a salary reduction agreement and using pre-tax dollars, then they would not be subject to tax in this case either. On the other hand, if an employer pays for the premiums, then they can pay for premiums as a deductible business expense. However, the monies paid as benefits would be taxable income to the employee at the time of payment.
Can you Deduct Long-Term Disability Insurance Premiums on Taxes?
If you paid for long-term disability insurance premiums with after-tax dollars, then you cannot deduct the premiums from your taxes. So, in this case, they are not tax-deductible expenses because they were paid with almost tax-free money.
But suppose you’re paying the long-term disability insurance premiums with pre-tax deduction dollars (like it’s part of a group benefits plan at work). In that case, you’ll likely be able to add these deductions when tax season comes around.
Also, See: Payroll Deductions
