Question

Jamarcus injured his hand playing softball one weekend. The injury prevented him from being able to work. Luckily for Jamarcus, his employer provides disability insurance as a nontaxable fringe benefit to all employees. Jamarcus received $1,300 in disability benefits while he was away from work. Jamarcus should include $_________ in gross income.

Answer 1

Since Jamarcus's disability benefits are provided as a nontaxable fringe benefit, he does not have to include the $1,300 he received in his gross income.

Step-by-step explanation:

Jamarcus received $1,300 in disability benefits from his employer as a non-taxable fringe benefit while being unable to work due to a hand injury.

In general, if the employer pays the premiums for disability insurance, then the benefits received under the policy are considered taxable income.

However, since the question specifies that the disability insurance is provided as a nontaxable fringe benefit, Jamarcus would not have to include the $1,300 he received in his gross income.

The key factor determining the taxability of these benefits is often who paid the premiums and how they did so. Here, it is implied the employer paid the premiums on a pre-tax basis, which typically makes the benefits non-taxable to the employee.

Jamarcus should include $0 in gross income.

Disability benefits received through an employer's disability insurance are generally considered nontaxable fringe benefits. This means that the amount received does not need to be included in gross income for tax purposes. Therefore, Jamarcus does not need to include the $1,300 in disability benefits in his gross income.