While most income you receive is generally considered taxable, there are some situations when
certain types of income are partially taxed or not taxed at all.
To ensure taxpayers are
familiar with the difference between taxable and non-taxable income, the Internal Revenue Service
offers these common examples of items that are not included in your income:
- Adoption Expense Reimbursements for qualifying expenses
- Child support payments
bequests and inheritances
- Workers’ compensation benefits
- Meals and Lodging for
the convenience of your employer
- Compensatory Damages awarded for physical injury or
- Welfare Benefits
- Cash Rebates from a dealer or manufacturer
Some income may be taxable under certain circumstances, but not taxable in other situations.
Examples of items that may or may not be included in your income are:
- Life Insurance If you surrender a life insurance policy for cash, you must include in
income any proceeds that are more than the cost of the life insurance policy. Life insurance
proceeds, which were paid to you because of the insured person’s death, are not taxable unless
the policy was turned over to you for a price.
- Scholarship or Fellowship Grant If
you are a candidate for a degree, you can exclude amounts you receive as a qualified scholarship
or fellowship. Amounts used for room and board do not qualify.
- Non-cash Income Taxable
income may be in a form other than cash. One example of this is bartering, which is an exchange
of property or services. The fair market value of goods and services exchanged is fully taxable
and must be included as income on Form 1040 of both parties. All other items—including income
such as wages, salaries and tips—must be included in your income unless it is specifically
excluded by law.
These examples are not all-inclusive. For more information, please contact our firm.