Samantha was ill for four months this year. Samantha missed work during this period, but disability insurance paid $18,000 of disability pay to replace her missed salary. Samantha shares the cost of the insurance with her employer. This year Samantha's employer paid $2,200 in disability premiums for Samantha as a nontaxable fringe benefit and Samantha paid the remaining $1,100 of premiums from her salary. What amount of the disability pay must Samantha include in her gross income (Rounded to the nearest whole dollar)?

Question

Quizplus · Accepted Answer

Samantha must include in her gross income the portion of the disability pay that is attributable to the premiums paid by her employer. Since her employer paid 2/3 of the premiums ($2,200 out of $3,300 total), 2/3 of the disability pay is taxable. Therefore, 2/3 of $18,000, which is $12,000, must be included in her gross income.

Samantha Was Ill for Four Months This Year