Question

Matilda works for a company with 1,000 employees. The company has a hospitalization insurance plan that covers all employees. However, the employee must pay the first $3,000 of his or her medical expenses each year. Each year, the employer contributes $1,500 to each employee’s health savings account (HSA). Matilda’s employer made the contributions in 2014 and 2015, and the account earned $100 interest in 2015. At the end of 2015, Matilda withdrew $3,100 from the account to pay the deductible portion of her medical expenses for the year and other medical expenses not covered by the hospitalization insurance policy. As a result, Matilda must include in her 2015 gross income_______.

a. $0.
b. $100.
c. $1,600.
d. $3,100.
e. None of these.

Answer 1

A) $0

Step-by-step explanation:

When an employee has a health savings account (HSA), he/she is not taxed when they contribute money to the account, or when they withdraw money from it, not even the interests earned by the account are taxed.

Each employee is limited to a $3,500 contribution per year for individuals and $7,000 for family coverage.