Question

Alan's employer maintains a long-term disability income plan on which appears our premiums last year Alan receipt $40,000 in benefits under the plan during his period of disability how much of the benefits received it and he must Alan included as income

Answer 1

Answer -

Amount of benefits received must be included in Alan's Income -

1). If the employer pays the entire insurance premium, then the benefits received are 100 percent taxable to the employee.

2). If the employer pays a portion of the premium and the employee pays the balance with post-tax dollars, then the benefits are taxable in the same proportion as the percentage of the premium paid by the employer.

3). If the employer pays a portion of the premium and the employee pays the balance with pre-tax dollars through a Section 125 Cafeteria Plan, then the benefits received are 100 percent taxable to the employee.

4). If the employer pays nothing and the employee pays the entire premium with post-tax dollars, then the benefits received are not taxable.

5). If the employer pays nothing and the employee pays the entire premium with pre-tax dollars, then the benefits received are 100 percent taxable to the employee.