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

Since the employer paid $2,200 of the premiums as a nontaxable fringe benefit, the portion of the disability pay attributable to the employer's contribution is taxable. Samantha's employer paid 2/3 of the premiums, so 2/3 of the $18,000 disability pay, which is $12,000, is taxable.

Samantha Was Ill for Four Months This Year