Question

True or False - If the taxpayer's employer pays the premiums for a disability or health insurance policy, benefits received thereunder must be included in gross income unless for medical care or permanent loss of body part or function.

Answer 1

The statement is true: benefits from a disability or health insurance policy paid for by an employer are included in gross income unless they are for medical care or permanent loss of a body part or function.

Step-by-step explanation:

The statement is True. If the taxpayer's employer pays the premiums for a disability or health insurance policy, the benefits received from that policy are generally included in the taxpayer's gross income. However, there are exceptions to this rule. Specifically, the benefits do not need to be included in gross income if they are paid out for the cost of medical care or for the permanent loss of a body part or function.

This exclusion applies to various insurance benefits, such as those from health and accident plans, certain long-term care premiums, and amounts received for permanent loss or loss of use of a body part or function. It's important to note that if the employer pays only a portion of the premiums, and the employee pays the rest with after-tax money, then only the portion of the benefits attributable to the employer's payments would be included in gross income.