Taxable & Non Taxable income
Most types of income are taxable including wages and tips (unless the law specifically excludes it). This includes non-cash income from bartering- the exchange of property or services. In bartering, both parties must include the fair market value of goods or services received as income on their tax return. Income can include money, property or services that you receive, but here in this article I want to highlight some examples of income that are usually not taxable:
- Child support payments; (For Divorces on or after Jan 1st, 2019, Alimony payments are no longer taxable under the Tax reform)
- Gifts, bequests and inheritances; (certain restrictions apply)
- Welfare benefits;
- Damage awards for physical injury or sickness (punitive awards are normally taxable);
- Cash rebates from a dealer or manufacturer for an item you buy;
- Reimbursements for qualified adoption expenses.
- Life insurance proceeds paid to you because of an insured person’s death (however, cash redeemed over cost from a life insurance policy is taxable), and
- Qualified scholarship is normally not taxable as long as meant/used for tuition and required course books (room & board portion are normally taxable).
Also, if you received a refund, credit or offset of state or local income taxes, you may be required to report that amount as income. Again, in the end, I would like to emphasize that each person’s situation is different so it’s important to fully consider your specific situation before deciding what sort of income is not taxable. For additional information, please check IRS website at www.irs.gov