Disability Benefit After-Tax Value Calculator

Disability insurance protects your most valuable asset: your ability to earn. But not all benefits are equal. Whether benefits are taxed depends on how premiums were paid, and that can change how much of your take-home pay a policy replaces. This calculator shows the after-tax picture.

What this calculator does

Enter your gross income, your group policy's monthly benefit and who pays its premium, your individual policy's monthly benefit (paid with after-tax money), your filing status and state tax rate. It shows:

• the share of your take-home pay your benefits would replace,
• your benefits after tax per month,
• your take-home pay now per month,
• the monthly shortfall, and
• the tax on group benefits, if any.

The formula in plain English

Take-home now = gross income after 2026 federal income tax, Social Security, Medicare and state tax, ÷ 12.

Tax on group benefits: if your employer paid the premium, or you paid it pre-tax, the yearly benefit is taxed as income. The calculator applies federal and state income tax. Social Security and Medicare don't apply after the first six months of disability.

Individual benefits from policies you pay with after-tax money are tax-free.

Benefits after tax = group benefit − tax on it + individual benefit.

Replacement = benefits after tax ÷ take-home now.

A worked example

Dr. Garcia earns $250,000, is single and pays 5% state tax. Her group policy pays $10,000 a month, and her employer pays the premium. She also has an individual policy paying $5,000 a month, which she pays for with after-tax dollars.

• Take-home now: about $14,220 a month.
• Tax on the group benefit: about $1,960 a month.
• Benefits after tax: about $13,040 a month.
• Replacement: about 92% of her take-home.
• Shortfall: about $1,190 a month.

Without the individual policy, her benefits would replace only about 57% of her take-home, and she'd need to cut her spending a lot.

Why it matters at each career stage

If you're: Resident / fellow

Many programs offer group disability coverage. Buying an individual own-occupation policy in training often locks in lower rates and options to increase coverage later without new medical exams.

If you're: Employed

Check whether your group policy is taxable, its monthly cap and how it defines disability. Individual coverage fills the gap and goes with you if you change jobs.

If you're: Practice owner

Owners usually need personal disability insurance plus business overhead expense coverage. If your practice pays your premiums, benefits may be taxable.

Making your coverage work

Know your definition of disability. Own-occupation coverage is the strongest for clinicians.

Check the benefit cap. Many group policies cap monthly benefits well below 60% of high incomes.

Look at what counts. Bonuses, call pay and moonlighting income may not be covered.

Consider paying after tax. If allowed, paying group premiums with after-tax dollars makes benefits tax-free.

Review as income grows. Future increase riders let you buy more coverage without new underwriting.

How much coverage is enough?

Many advisers suggest aiming to replace about 60% to 70% of your gross income, which often covers most of your take-home pay once taxes and retirement contributions stop. But the right amount depends on your fixed expenses: housing, student loans, childcare and insurance. Add up the monthly costs you'd still have if you couldn't work, and compare them with your after-tax benefits.

A note on taxes

This calculator simplifies the tax rules. Partial employer payment, cafeteria plans and other arrangements can make part of the benefit taxable. Check your plan documents or ask your benefits office.

Next, see how much coverage you need with the disability insurance calculator, plan practice coverage with the BOE insurance calculator and read our disability insurance basics.