Are LTC and Disability Insurance Premiums Tax-Deductible for Employers? What Depends on Your Facts

Are LTC and Disability Insurance Premiums Tax-Deductible for Employers? What Depends on Your Facts

As of October 28, 2026. Statements about employee income and benefits come from IRS Publication 525 (2025). 2026 long-term care figures come from IRS Rev. Proc. 2025-32.

MSO and locum tenens leaders evaluating group long-term care (LTC) and disability insurance (DI) often ask whether the premiums are deductible. The honest answer is that it depends on the employer's facts. What IRS guidance does spell out is how the way premiums are paid affects the people covered.

The employer deduction depends on your facts

Hollowtree does not state a general rule that employer-paid LTC or DI premiums are fully deductible, and does not publish a standard percentage by which a deduction reduces cost. The treatment depends on factors that include:

• the employer's entity type, such as a C corporation, S corporation, partnership, sole proprietorship or tax-exempt organization;
• whether the covered person is a common-law employee, an owner, a partner or a more-than-2% S corporation shareholder;
• how the plan is structured, who pays the premium and how it is paid, including whether employees pay with pre-tax dollars; and
• for long-term care, whether the coverage is a tax-qualified contract under IRC section 7702B.

Any after-tax cost estimate depends on those answers and on the employer's own tax position, so model it with your tax advisor.

Disability insurance: who pays affects how benefits are taxed

IRS Publication 525 explains that disability benefits are generally taxable to the employee when the employer paid for the plan, and are not taxable when the employee paid the premiums. Premiums paid with pre-tax dollars can change the result. This is why the contribution structure is a plan-design decision with consequences for employees, not just a cost question for the employer.

Long-term care insurance: employer contributions and individual limits

For long-term care coverage, IRS Publication 525 says employer contributions to provide coverage generally aren't included in an employee's income, but contributions made through a flexible spending or similar arrangement must be included. Owners and more-than-2% S corporation shareholders can be treated differently.

Separately, when individuals pay for qualified LTC coverage themselves, IRS age-based limits cap how much of the premium counts as a medical expense: $500 to $6,200 for 2026, depending on age (Rev. Proc. 2025-32, section 3.27). Those limits, and the $430-per-day per-diem figure for LTC benefit payments (section 3.62), are not caps on employer premium deductions.

Important limitations

This article summarizes IRS guidance as of the date shown above. It is not tax, legal or accounting advice and does not address any particular employer's or individual's situation. Tax rules and IRS guidance change. Coverage is subject to plan terms, eligibility requirements and the carrier's policy documents.

Talk to Hollowtree

Hollowtree can help MSO and locum tenens organizations evaluate group LTC and disability plan design and coordinate with your tax advisor on the questions above. For an overview of LTC insurance for employers, see our LTC hub, or estimate group LTC premiums for your workforce.