In terms of tax, how are premiums for personally owned disability income insurance treated?

Premiums for personally owned disability income insurance are not tax deductible. This means that individuals who purchase their own disability income insurance cannot claim the premiums as a deduction on their tax returns. The rationale behind this treatment is that the benefits received from a personally owned policy are generally tax-free when collected. The tax code incentivizes this by allowing the benefits to remain untaxed, which is considered a powerful advantage for policyholders.

Since the premiums are paid with after-tax dollars, the lack of deductibility aligns with the idea that taxpayers should not receive a tax benefit when they have already used their income on an expense that provides tax-free benefits. This creates a straightforward relationship where the person bear the cost of premiums entirely, while the potential payouts in times of need remain exempt from taxation.