When long-term disability premiums (LTD) are paid with pre-tax dollars, the monthly disability benefit becomes taxable income.
The BENEFIT should FAR EXCEED the amount paid in PREMIUMS. Taxing the benefit instead of the amount paid appears greedy. The premiums paid in advance of the retirement period is money being used by the Insurer immediately and possibly long term.
Don’t they (The Insurer) have to pay taxes on that money as INCOME? How many times is the Government trying to get paid on that money?
Ok, so the money having been made by you and spent on insurance, but “not counted” for tax purposes is money the Government loses. It is also a lost deduction because you are not supposed to claim it as an expense although it was.
I wonder which is greater, the loss of the tax to them, or the deduction to you annually?
So to make up for the loss of the amount of tax on that little money, they will tax ALL THE MONEY IN THE BENEFIT when you start getting it! That just seems over the top to me. IJS