John is injured and receives $16,000 of income from a disability policy.John's employer paid 75% of the disability policy premiums and John paid the remainder.In addition,John's employer has paid all the $3,000 of premiums on a health policy that paid John's doctor bills of $10,000.How much of the benefits must John include in income?

Question

Quizplus · Accepted Answer

To calculate the taxable income from the disability policy, we need to first determine the amount that was paid for by John's employer and the amount that John paid. Since John's employer paid 75% of the premiums, that means John paid 25% (100% - 75%) of the premiums.

Premiums paid by John's employer: 
75% of $x = $3,000 
$x = $4,000

Premiums paid by John: 
25% of $4,000 = $1,000

Total disability benefit: 
$16,000

Taxable income: 
John must include the portion of the disability benefit that was paid for by him in income.

$16,000 x ($1,000 / $5,000) = $3,200

Therefore, John must include $3,200 of the disability benefit in income.

The health policy premiums and doctor bills are not relevant for the calculation of the taxable income from the disability policy.

John Is Injured and Receives $16,000 of Income from a Disability