Question

Gary participates in a group long-term care insurance program through his employer. The employer pays for a standard level of coverage for all employees, and Gary pays for an additional voluntary amount of coverage. In all, Gary's employer pays two thirds of the cost and Gary pays the remaining one third of the cost. If Gary makes a claim under this policy, what percentage of his benefits would be taxable based on the premium structure?a. 0%

b. 67%
c. 33%
d. 100%

Answer 1

A. 0%

Step-by-step explanation:

Premiums are tax-deductible according to the payroll system. Therefore, the answer should be "0%".

As the premiums are tax-deductible, so the employee does not need to pay any taxes. Therefore, Gary does not pay any tax from his claim on that premium. Hence, whatever he contributes during his tenure, Gary does not need to pay any tax on that.