According to IRS guidelines (Publication 525), disability benefits from a group policy paid for by the employer are consideredtaxable incometo the employee because the premiums were not included in the employee’s taxable income. If the employee paid the premiums with after-tax dollars, the benefits would be tax-free.
Option A: Incorrect. Benefits are taxable if the employer paid the premiums.
Option B: Incorrect. Disability benefits are not deductible from gross income.
Option C: Correct. The benefits are taxable income.
Option D: Incorrect. Benefits are subject to income tax, not just Social Security or FUTA taxes.
[:, Prometric Oklahoma Life, Accident, and Health or Sickness Producer Exam Content Outline (Section: General Knowledge – Accident and Health Insurance)., IRS Publication 525 (Taxable and Nontaxable Income)., Standard insurance study guides (e.g., Kaplan, ExamFX) for Oklahoma producer licensing., ]
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