Brad was disabled for part of the year and he received $11,500 of benefits from a disability insurance policy purchased by Brad's employer. Brad must include all $11,500 of benefits in his gross income because Brad was not taxed on the disability insurance premiums paid by his employer.

Question

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Disability insurance benefits are included in gross income if the premiums were paid by an employer and not included in the employee's taxable income. This is known as the "unfunded" or "noncontributory" rule. Since Brad was not taxed on the premium paid by his employer, he must include the full amount of benefits received in his gross income.

Brad Was Disabled for Part of the Year and He