Question

Which of the following statements does not accurately describe the tax treatment of premiums and benefits of individual accident and health insurance?

A) Premiums are generally tax-deductible.
B) Benefits are generally tax-free.
C) Premiums are generally not tax-deductible.
D) Benefits are generally taxable.

Answer 1

The inaccurate statement about the tax treatment of individual accident and health insurance premiums and benefits is that premiums are generally tax-deductible. In reality, individual health insurance premiums are not typically tax-deductible, while the benefits received are usually tax-free.

Step-by-step explanation:

The statement that does not accurately describe the tax treatment of premiums and benefits of individual accident and health insurance is: Premiums are generally tax-deductible.

Typically, the premiums paid for individual health insurance are not tax-deductible for the individual. This is because individual health insurance premiums are considered personal expenses and can only be itemized as a deduction if they, along with other qualified medical expenses, exceed 7.5% of the individual's adjusted gross income. On the other hand, health insurance premiums paid by employers are often tax-deductible for the employer and are not included in the employee's taxable income.

The benefits received from an individual health insurance policy are generally tax-free. This means that if you receive payments from your health insurance for a claim, those benefits are not considered taxable income.