Section 162 of the Internal Revenue Code allows deductions by a business for reasonable compensation, including salaries and bonuses to its employees. As a result of this section, disability income insurance can be purchased and may be an attractive planning alternative: The employer pays as a bonus the amount of the disability premium to its employee and takes a deduction for that amount on its corporate income tax return. The employee then takes that amount into income. If disability benefits are paid to the employee under this strategy, they are received totally income tax-free.