Tim earns a salary of $40,000.This year,Tim's employer establishes a cafeteria plan under which Tim signed a salary reduction of $2,500 for which $1,500 is to cover his health insurance premiums and $1,000 is transferred to a flexible spending account to reimburse medical expenses.During the year,he is reimbursed $900 for medical expenses.What is the total taxable to Tim this year?

Question

Quizplus · Accepted Answer

Tim's taxable income is $37,500. This is because his salary is $40,000, but he has a salary reduction of $2,500 for his health insurance premiums and flexible spending account. This means that his taxable income is $40,000 - $2,500 = $37,500.

Tim Earns a Salary of $40,000