Tanya's employer offers a cafeteria plan that allows employees to choose among a number of benefits. Each employee is allowed $6,000 in benefits. For 2020, Tanya selected $3,480 ($290 per month)of parking, $1,720 in 401(k)contributions, and $800 of cash. How much must Tanya include in taxable income?

Question

Quizplus · Accepted Answer

Tanya must include $800 in taxable income. The parking and 401(k) contributions are pre-tax benefits under the cafeteria plan, meaning they are not included in taxable income. The $800 of cash, however, does not qualify as a pre-tax benefit and must be included in her taxable income. The total benefits selected ($3,480 + $1,720 + $800 = $6,000) do not exceed the allowed $6,000, so only the cash amount is taxable.

Tanya's Employer Offers a Cafeteria Plan That Allows Employees to Choose