Your own disability income insurance is not a deductible business expense.
Why it is not deductible
Premiums on a policy that pays you a benefit because you cannot work are not deductible on Schedule C or anywhere else. The reason is symmetry: because you pay with after-tax dollars, any benefit arrives tax-free. Deducting the premium would make the payout taxable, which is the worse trade in almost every case.
Log it once, with the line already on it. Type an expense in plain words in ClaryBook and it is filed with a date, vendor, amount and what it was for, so the number your preparer needs for your own disability income insurance is already written down.
Start for freeWhat your own disability income insurance is confused with
- Line 15, insurance
- Line 15 covers policies protecting the business against claims and losses; a policy protecting your personal earnings is not one of them.
- Line 14, employee benefit programs
- Disability coverage you buy for employees is an employee benefit program on line 14, while the same coverage on yourself is not deductible.
- Schedule A, schedule a, personal itemised deduction
- Disability premiums are not medical care, so they do not become a Schedule A medical deduction either.
Examples people try to deduct here
- A $180 a month own-occupation disability policy on yourself
- $95 a month of short-term disability coverage bought as a sole proprietor
- A rider adding residual disability benefits to your personal policy
- A $2,400 annual premium for a policy paying you $4,000 a month if you cannot work
What does not belong here
- A line 15 deduction, which is the most common error here
- A Schedule A medical deduction, since disability coverage is not medical care
- Business overhead expense coverage, which is a separate business policy on line 15
The limit that applies
Because the premium is never deducted, benefits paid under the policy are not taxable income to you.
What to keep
Keep the policy so you can show the benefit would be paid to you personally. That same document is what keeps a future benefit tax-free.
Other things that are not deductible
| Expense | Line |
|---|---|
| a business suit | Not deductible |
| a government fine or penalty | Not deductible |
| a parking ticket | Not deductible |
| a personal expense on the business card | Not deductible |
| a spouse's airfare on your business trip | Not deductible |
| a traffic ticket | Not deductible |
| an unpaid invoice | Not deductible |
| commuting mileage | Not deductible |
| country club dues | Not deductible |
| estimated tax payments | Not deductible |
| federal income tax | Not deductible |
| groceries for your home | Not deductible |
Related lookups
- Where does general liability insurance go?
- Where does employee health insurance go on Schedule C?
- Where does state income tax go on Schedule C?
Sources
This page explains how Schedule C lines work. It is general information, not tax advice for your situation. If an expense is large or the answer turns on a fact about your business, confirm it with your tax preparer.
Looking for a different expense? The full Schedule C line lookup has every line from 8 to 27 with the expenses that belong on each, and Schedule C expense categories walks the whole form in order.
Log it once, with the line already on it. Type an expense in plain words in ClaryBook and it is filed with a date, vendor, amount and what it was for, so the number your preparer needs for your own disability income insurance is already written down.
Start for free