Income protection insurance and tax: deduction, taxation and AM contributions
Income protection premiums are tax-deductible, with a tax deduction value of approximately 26%. Payments are taxed as ordinary A-income, but without the labour market contribution.
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Is income protection tax-deductible?
Yes. Income protection premiums qualify for a general tax deduction, and most providers automatically report them to the Danish Tax Agency. The tax deduction value is approximately 26% (GF Forsikring states 25.6%). Products that also cover incapacity for work, such as Lederne and Business Danmark, allow 95% of the premium to be deducted.
Sources: A&TIL: Tax rules on income protection · GF Insurance: Income protection insurance
Are income protection payments taxable?
Yes. Income protection payments are taxed as ordinary A-income, but no labour market contribution (AM-bidrag) is payable on them. Income protection is therefore not tax-free.
Is income protection calculated before or after tax?
The payment of the income protection is indicated before tax - just like the unemployment benefits. So, you must pay tax on the amount. The coverage rate (e.g. 90%) is calculated from your gross wage; at Alka, the wage after the AM contribution.
Where is the income protection deduction shown on the annual tax statement?
According to A&TIL, the premium is reported in box 439 of the advance declaration and in box 52 of the annual declaration. Always check that the amount has been included.