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This year Zach was injured in an auto accident. As a result, he received the following payments. Zach received $18,000 of disability pay. Zach has disability insurance provided by his employer as a nontaxable fringe benefit. Zach and his employer each contributed 50% to the premiums of $4,300. Zach's hospital bills totaled $4,500 and were paid by his health insurance. Zach has health insurance provided by his employer as a nontaxable fringe benefit. Zach's employer paid $6,250 in health insurance premiums for Zach this year.

What amount must Zach include in his gross income?A. $4,500B. Zero - None of these benefits is included in gross income.C. $10,550D. $22,500E. $18,000

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Answer: E. $18,000

Explanation:

As long as a payment is related to insurance be it health insurance or other insurance policies it is not to be included in the calculation of gross income.

The Employee must include Disability Payments in their gross income though. It should be classified as a NONTAXABLE FRINGE BENEFIT.

Therefore Zach having been paid $18,000 in disability should include it in his gross income.

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