Tim earns a salary of $40,000. This year, Tims employer establishes a cafeteria plan under which Tim signed a salary reduction of $2,500 for which $1,500 is to cover his health insurance premiums and $1,000 is available to reimburse medical expenses. During the year, he is reimbursed $900 for medical expenses. What is the total taxable to Tim this year?
A. $37,500
b. $37,600
c. $38,400
d. $40,000