The Leading Business Education Network for Doctors, Financial Advisors and Health Industry Consultants

Additional Disability Insurance for Practice Owners and Physician Executives 

By Perry D’Alessio CPA

Some medical clinics, hospitals, health care employers and other business entities may offer disability insurance to their employees on a group basis as part of an employee benefit program. This is a good thing.

The expense for this coverage is typically deducted as an ordinary and necessary expense by the employer entity.

Additional DI

However, many entities also purchase additional disability insurance for the owners and executives; etc. This additional disability insurance expense should not be deducted on the entity’s tax return for two reasons.

1. First, it would probably be considered a discriminatory benefit to the owners and, therefore, not be allowed as a deduction anyway.
2. Second, and more importantly, when a person becomes disabled and qualifies for disability benefits whose premiums have been deducted as a business expense by the entity, the disability insurance proceeds are considered taxable income to the person receiving them.

A Catastrophe

This can be personally catastrophic since disability insurance covers only a portion (approximately 60 percent) of regular earnings. The coverage was designed to be paid on an after tax basis. The benefits would be tax free to the beneficiary and would be close to the disabled person’s net take home pay before being disabled.

***

***

Assessment

Here is one of those instances where the traditional tax planning thought process is overridden by a long term (potential) tax cost / benefit decision.

Channel Surfing the ME-P

Have you visited our other topic channels? Established to facilitate idea exchange and link our community together, the value of these topics is dependent upon your input. Please take a minute to visit. And, to prevent that annoying spam, we ask that you register. It is fast, free and secure.

More:

• Reviewing Physician Disability Insurance Policies
• More on Disability Insurance for Physicians

Conclusion

Your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com

OUR OTHER PRINT BOOKS AND RELATED INFORMATION SOURCES:

• PRACTICES: www.BusinessofMedicalPractice.com
• HOSPITALS: http://www.crcpress.com/product/isbn/9781466558731
• CLINICS: http://www.crcpress.com/product/isbn/9781439879900
• ADVISORS: www.CertifiedMedicalPlanner.org
• FINANCE: Financial Planning for Physicians and Advisors
• INSURANCE: Risk Management and Insurance Strategies for Physicians and Advisors
• Dictionary of Health Economics and Finance
• Dictionary of Health Information Technology and Security
• Dictionary of Health Insurance and Managed Care

Filed under: Health Insurance, Insurance Matters | Tagged: disability insurance, disability insurance taxation, Perry D'Alessio CPA |