Question

Ayeshia filed her tax return, properly claiming the head of household filing status. Ayesha's employer paid or provided the following to Ayesha:

Wages	$110,000
Fair market value of qualified dependent care services	3,000
Premiums for $50,000 qualified group term life insurance	1,350
Medical insurance premiums	5,725

How much of this income should Ayesha report (assume benefits are provided on a nondiscriminatory basis)?

A) $110,000

B) $111,350

C) $113,000

D) $120,075

Answer 1

1.Wages - $110,000 - REPORTABLE

2.Fair market value of qualified dependent care services:

If you paid a daycare center, babysitter, summer camp, or other care provider to care for a qualifying child under age 13 or a disabled dependent of any age, you may qualify for a tax credit of up to 35 percent of qualifying expenses of $3,000 for one child or dependent, or up to $6,000 for two or more children or dependents.

Hence amount of $3000 is not reportable

3.Premiums for $50,000 qualified group term life insurance:

Up to the first $50,000 of group term coverage, employees are exempt from all federal taxes.Hence premiums for $50,000 qualified group term life insurance is not reportable

4.Medical insurance premiums

Health insurance is not taxable income, even if your employer pays for it. Under the Affordable Care Act, the amount your employer spends on your premiums appears on your W-2s, but it should in no way be classified as income Hence the premium is not reportable.

Hence only $110000 needs to be reported by Ayeshia in her return