Premiums paid for an individual disability income policy are generally

• A. Fully tax deductible
• B. Partially tax deductible
• C. Not tax deductible
• D. Tax-deductible only if employer-paid

Answer: (C)

Premiums for an individual disability income policy are generally not tax-deductible. The IRS treats these premiums as a personal expense, since the policy is designed to protect the individual's income rather than to cover deductible medical costs. Because you’re paying with after-tax dollars, there isn’t a deduction available on your return. A helpful related point: the benefits you receive are typically tax-free to the extent you paid your premiums with after-tax dollars. If an employer pays the premium, that arrangement changes the tax treatment for the employer (it’s usually deductible as a business expense), but it does not create a personal deduction for the employee.