What is Long-Term Disability Insurance Premium?
Long-term disability insurance premiums can vary widely depending on various factors such as age, gender, occupation, health status, lifestyle choices, and the amount of coverage you need. On average, the monthly premiums for long-term disability insurance can range from 1% to 3% of your annual income.
For example, if your annual income is $50,000 and you opt for a long-term disability insurance policy that pays you 60% of your income if you become disabled, your monthly premium may be between $50 and $150.
Is 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.
Suppose the policy is paid for with after-tax dollars, such as when an individual purchases a policy on their own or pays the premiums directly to the insurance company. In that case, the premiums are not tax deductible.
However, suppose the policy is paid for with pre-tax dollars, such as when an employer offers the policy as part of a group benefits plan, and the premiums are deducted from the employee’s paycheck before taxes are taken out. In that case, the premiums may be tax deductible.
In this case, if an employee pays for the premiums with pre-tax dollars through a salary reduction agreement, the premiums would not be included in their taxable income. However, if the employer pays for the premiums, the premiums would be tax deductible as a business expense for the employer. Still, the benefit payments would be taxable income for the employee when received.
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 on your taxes. This is because the premiums were paid with already taxed money, so they are not considered tax-deductible expenses.
However, if you paid for the long-term disability insurance premiums with pre-tax deduction dollars, such as through a group benefits plan at work, you may be able to deduct the premiums on your taxes.
Also, See: Payroll Deductions