Question

- Katia’s employer funds child care for all employees' children. She pays nothing for this service. The cost of Katia's child care is $6,400 a year. How much of the child care benefits are taxable to Katia?

A) $0

B) $1,400

C) $5,000

D) $6,400

- Jasmine's employer pays $7,500 in tuition this year for Jasmine to attend a graduate business program. How much of the employer-provided tuition is taxable to Jasmine?

A) $0

B) $2,250

C) $5,250

D) $7,500

- Gary filed his tax return, properly claiming the head of household filing status. Gary's employer paid or provided the following to Gary:

Wages	$105,000
Fair market value of qualified dependent care services	2,500
Premiums for $50,000 qualified group term life insurance	1,200
Medical insurance premiums	1,750

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

A) $105,000

B) $107,500

C) $108,700

D) $110,450

Answer 1

-If employer is paying child care services to for employee then employee is not required to pay any tax on the same. Hence the answer is A) 0.

-If employer pays more than $5250 for tutuion of emplyee child than employee is required to pay tax on amount greater than 5250$ i.e Answer is B) $2250.

-Income calculation

Wages $105000 taxable

Qualifying dependent expenses are exempt upto $3000 for one child. Hence are exempt.

Group term insurance is exempt upto $50000 from personal income tax . hence exempt.

Medical insurance premium is also exempt upto $25000. Hence exempt.

Answer is A)105000.