Adding the cost of your Disability Insurance to your W-2
What you need to do is approach your employer, the human resources person, or the benefits department and ask to have the cost of your disability insurance, pro-rated for just your cost out of the group, added to your W-2. Some employers will simply add the number to your existing W-2, others will issue a separate W-2 specifically for the cost of disability insurance. What this move will do is essentially make sure you pay tax on the premium although you are not paying the premium. For example, if the employer pays $1,200.00 a year for your disability premium on a pro-rated share out of the group, you will pay tax on that premium. If your tax bracket is 33% you will pay $400.00 dollars in income tax on that benefit, so the cost to you per year for this move would be $400.00 dollars. If you are young and healthy the cost is typically very low, perhaps as little as a few dollars a week. If you are older, unhealthy and/or female, the cost can be very high, may even go to a few hundred dollars each month. This is a very suboptimal scenario where you are paying tax on the premium not the benefit.

