How are premiums paid for personally owned disability income insurance classified for tax purposes?

Premiums paid for personally owned disability income insurance are classified as non-tax deductible for tax purposes. This means that individuals who purchase their own disability income insurance cannot deduct the cost of the premiums from their taxable income.

The rationale behind this classification is that the benefits received from such policies are typically tax-free when a claim is made. Since the individual receives tax-free benefits, the IRS does not allow a deduction for the premiums. This contrasts with other types of insurance, like business-related policies, where premium payments might be deductible under certain circumstances. Understanding this classification is crucial for individuals when planning their finances, especially considering the role of insurance in providing income protection.