The tax law does not allow disability insurance to be deducted, however it does allow Loss of License (LOL) insurance to be written off.
LTD (Long-Term Disability Insurance)
Some companies might include the premiums as imputed income so the benefits would be received tax-free. If that is the case, then it is not deductible. That is typical of LTD. LTD (Long Term Disability) is most likely not deductible because it is typically paid with post-tax dollars, which is why LTD benefits are received tax-free.
LOL (Loss of License Insurance)
LOL is viewed much like doctor's malpractice insurance. It is an ordinary and necessary expense that many pilots choose to pay for, in order to protect them from the financial impact associated with not being able to exercise the privileges associated with a pilot's license.
LOL insurance may be purchased from ALPA or through your employer.
The problem with LOL insurance purchase via an employer is that most airlines lump together disability and LOL, so you have to make sure it is strictly LOL, and not disability, that is being deducted. If it is lumped together with disability, then you need to determine what percent is LOL. This is not something we can advise on. The percentage is determined by you, and it should be substantiated.
Alpa's LOL insurance is the easiest to substantiate, because that is definitely LOL.
Once you do determine the amount of LOL insurance that you are writing off, it can be included on the "Add Yearly Expenses" page under the "Profession-Related Fees" category.
