Chapter 16/1: Federal Tax and Health Insurance

Which of the following statements is true regarding key person disability income insurance?

A business cannot deduct the premiums for key person disability income insurance, but the benefits are received tax-free. The correct answer is: Premiums are not tax-deductible, but benefits are received tax-free.

Generally, how are health insurance policies taxed?

As a general rule, if the premiums are tax-deductible, the benefits are taxed as income. The correct answer is: If premiums are tax-deductible, benefits are taxed as income.

Benefits for individual medical expense, LTC and Medigap policies are:

Benefits for individual medical expense, LTC and Medigap policies are received tax-free. The correct answer is: Not taxable.

What are the tax implications of benefits received under an individual medical expense policy, long-term care policy or Medicare supplement policy?

Benefits for individual medical expense, long-term care and Medigap policies are received tax-free. The correct answer is: Benefits are not taxable.

Jerry has a group disability income policy. His employer pays all premiums. Which of the following is true regarding the taxation of benefits?

Employer-paid premiums for a group disability income policy are tax-deductible to the employer as a business expense; therefore, benefits are taxable to the employees. The correct answer is: They are taxable.

Ken has a group disability income policy. His employer pays all premiums. Which of the following is true regarding the taxation of benefits?

Employer-paid premiums for a group disability income policy are tax-deductible to the employer as a business expense; therefore, benefits are taxable to the employees. The correct answer is: They are taxable.

If health insurance premiums are not tax-deductible, the benefits are:

If the premiums are not tax-deductible, the benefits are tax-free, as long as they do not exceed the actual cost of medical expenses. The correct answer is: Tax-free, as long as they do not exceed the actual cost of medical expenses.

Jenny's employer provides a short term disability income policy to all employees. Her employer pays 60% of the premiums. When Jenny is disabled, what portion of the benefits will be taxable to her?

In a contributory group disability income policy, the portion of benefits which correlate to the portion of employer-paid premiums is taxable. The correct answer is: 60%

Premiums for Medicare Part B may be tax-deductible under what circumstance?

Premiums for Medicare Part B premiums are treated just as any other medical expense inclusion as a deductible medical expense on a tax return. A person must itemize and medical expenses must exceed 10% of adjusted gross income before there is an allowable deduction. The correct answer is: The premiums for Medicare Part B are includable in overall medical expense for deduction subject to the 10% threshold for medical expense deduction.

Individual Medicare supplement and LTC premiums are:

Premiums for Medigap and LTC policies may be deducted from taxable income if the individual's unreimbursed medical expenses exceed 10% of their adjusted gross income. The correct answer is: Only tax-deductible if an individual's unreimbursed medical expenses exceed 10% of their adjusted gross income

Individual Medicare supplement and LTC premiums are:

Premiums for Medigap and LTC policies may be deducted from taxable income if the individual's unreimbursed medical expenses exceed 10% of their adjusted gross income. The correct answer is: Only tax-deductible if an individual's unreimbursed medical expenses exceed 10% of their adjusted gross income.

What are the tax consequences of individual Medicare supplement policy premiums and long-term care premiums?

Premiums for Medigap and long-term care policies may be deducted from taxable income if the individual's unreimbursed medical expenses exceed 10% of their adjusted gross income. The correct answer is: Premiums are only tax-deductible if a person's unreimbursed medical expenses exceed 10% of their adjusted gross income.

What are the tax consequences of individual Medicare supplement policy premiums and long-term care premiums?

Premiums for Medigap and long-term care policies may be deducted from taxable income if the individual_s unreimbursed medical expenses exceed 10% of their adjusted gross income. The correct answer is: Premiums are only tax-deductible if a person_s unreimbursed medical expenses exceed 10% of their adjusted gross income.

For an employer-sponsored group disability income policy:

Premiums for disability income insurance policies paid by employers are tax-deductible as a business expense and are not taxed as income of the employee. Disability income benefits are not taxable if the employee makes the premium payments, but if the premiums are fully paid by the employer, then benefits are fully taxed as the income of the employee. The correct answer is: Premiums paid by the employer are tax-deductible as a business expense.

Ben has an individual disability income policy. Which of the following is true?

Premiums for individual disability income insurance are paid with after-tax dollars, but benefits are not considered taxable income. The correct answer is: Premiums are not tax-deductible, but benefits are received tax-free.

Alex has an individual disability income policy. Of the following statements, which is correct?

Premiums for individual disability income insurance are paid with after-tax dollars, but benefits are not considered taxable income. The correct answer is: Premiums cannot be deducted from taxes, but benefits are tax-free.

Thomas has an individual disability income policy. Of the following statements, which is correct?

Premiums for individual disability income insurance are paid with after-tax dollars, but benefits are not considered taxable income. The correct answer is: Premiums cannot be deducted from taxes, but benefits are tax-free.

Arturo buys an individual disability income policy. What are the tax consequences?

Premiums for individual disability income policies are not tax-deductible, but benefits are received tax-free. The correct answer is: Premiums are paid with after-tax dollars.

Premiums for all of the following health insurance policies are tax-deductible as a business expense, EXCEPT:

Premiums paid for individually-owned disability income policies are not tax-deductible; however, disability income benefits are tax-free. The correct answer is: Individual disability income

Carol has an individual disability income policy. Which of the following is true?

Premiums paid for individually-owned disability income policies are not tax-deductible; however, disability income benefits are tax-free. The correct answer is: Premiums are paid with after-tax dollars and benefits are tax-free.

For an individual disability income policy:

Premiums paid for individually-owned disability income policies are not tax-deductible; however, disability income benefits are tax-free. The correct answer is: Premiums are paid with after-tax dollars and benefits are tax-free.

Which of the following is true regarding medical expense policies owned by sole proprietors?

Sole proprietors can fully deduct their premiums for medical expense insurance as a business expense. Benefits are received tax-free. The correct answer is: Premiums are tax-deductible and benefits are received tax-free.

For tax-purposes, disability income benefits paid through a group disability income policy in which the employer pays all premiums are:

When the employer pays the entire cost of group disability income premiums, benefits are 100% taxable to the employee. The correct answer is: Fully taxable

ABC employer pays the entire cost of the group health insurance premiums. Which of the following is true regarding the taxation of premiums and benefits?

When the employer pays the premiums for a group health insurance policy, the employer can tax-deduct the amount of premiums paid. Employees do not pay taxes on medical expense benefits received. The correct answer is: Premiums are tax-deductible to the employer and benefits are not taxable to the employees.

Roberto's Sewing Machine Company has a group disability income policy for its employees. Premiums are entirely paid by the company. Which of the following is true regarding the benefits?

When an employer pays all premiums for a group disability income policy, benefits are fully taxable to employees. The correct answer is: Taxable

George's Bowling Alley provides a group disability income policy to its employees. Employees pay a portion of the premiums. Which of the following is true?

When the cost of premiums is shared between the employer and employees, benefits are taxable based on the portion of premiums paid by the employer. The correct answer is: Benefits are taxable to employees based on the portion of premiums paid by George.

Wild Bill's Bowling Alley provides a group disability income policy to its employees. Employees pay a portion of the premiums. Which of the following is true?

When the cost of premiums is shared between the employer and employees, benefits are taxable based on the portion of premiums paid by the employer. The correct answer is: Benefits are taxable to employees based on the portion of premiums paid by Wild Bill.

Stan's Job Placement Services provides a group disability income policy to all employees. Premiums are paid in part by the employees. Of the following statements, which is true?

When the cost of premiums is shared between the employer and employees, benefits are taxable based on the portion of the premiums paid by the employer. The correct answer is: Benefits are taxable to employees based on the portion of the premiums paid by Stan.