Question

amantha was ill for four months this year. Samantha missed work during this period, but disability insurance paid $18,000 of disability pay to replace her missed salary. Samantha shares the cost of the insurance with her employer. This year Samantha's employer paid $2,200 in disability premiums for Samantha as a nontaxable fringe benefit and Samantha paid the remaining $1,100 of premiums from her salary. What amount of the disability pay must Samantha include in her gross income (Rounded to the nearest whole dollar)

Answer 1

Answer: $12,000

Step-by-step explanation:

Disability Insurance paid $18,000 to Samantha but Samantha had to pay $1,100 in premiums for the disability insurance while her employer paid $2,200. This premium that they both paid is the cost of her insurance payout for disability.

Her gross income will therefore be;

=
`(2,200)/(2,200 + 1,100)` * 18,000

= $12,000

This is her income because this is the percentage of the payout that was covered by her insurer.