This year Zach was injured in an auto accident.As a result he received the following payments. Zach received $18,000 of disability pay.Zach has disability insurance provided by his employer as a nontaxable fringe benefit.Zach's employer paid $4,300 in disability premiums for Zach this year.
Zach's hospital bills totaled $4,500 and were paid by his health insurance.Zach has health insurance provided by his employer as a nontaxable fringe benefit.Zach's employer paid $6,250 in health insurance premiums for Zach this year.
What amount must Zach include in his gross income?
A)$22,500
B)$18,000
C)$4,500
D)$10,550
E)Zero-none of these benefits are included in gross income.

Question

Quizplus · Accepted Answer

$18,000Disability payments that are received due to disability insurance paid for by the employer are considered taxable income. Since Zach's employer paid the disability insurance premiums and Zach received $18,000 in disability pay, this amount is taxable and must be included in his gross income. Health insurance payments for medical bills are generally not taxable, so the payments for Zach's hospital bills and the premiums paid by the employer for health insurance do not count as taxable income.

This Year Zach Was Injured in an Auto Accident