A disability benefit of $5,000 is received in a year from a contributory short-term disability plan in which the employer pays 25 percent of the cost of the plan. The amount of tax an employee in the 34 percent tax bracket would owe on this benefit is

Question

Quizplus · Accepted Answer

Since the employer pays 25% of the plan, 25% of the benefit ($1,250) is taxable. The tax owed on the taxable portion is 34% of $1,250, which is $425.

A Disability Benefit of $5,000 Is Received in a Year