Question

Terry has disability insurance provided by his employer as a nontaxable fringe benefit. Terry's employer paid $3,570 in disability premiums for Terry this year. What is the amount of disability insurance premiums paid by Terry's employer?

1) $3,570
2) $3,570 (nontaxable)
3) $3,570 (taxable)
4) Cannot be determined

Answer 1

Terry's employer paid $3,570 for disability insurance premiums on his behalf this year, and this amount is nontaxable to Terry as it is a fringe benefit from the employer.

Step-by-step explanation:

The amount of disability insurance premiums paid by Terry's employer for Terry this year is $3,570 (nontaxable). This is because the disability insurance is provided as a nontaxable fringe benefit, which means that even though the employer covers the cost of the premiums, it does not count as taxable income for Terry. This type of insurance is important as it provides financial support in case Terry is unable to work due to a disability, complementing other forms of financial support such as Social Security.