Common sources of income that are generally considered nontaxable
Laura J. Hudson, CPA
Epstein Schneider, PLC
Certified Public Accountants
480-729-6069
[email protected]
Is all the income you make in a year necessarily taxable? Income can be received in the form of money,property, or services. In most cases, an amount included in your income is taxable unless it is specifically exempted by law. Listed below are some of the more common sources of income that are generally considered nontaxable.
1. Gifts: not taxable to recipient, not deductible for donor
2. Inheritance: generally nontaxable
3. Fringe Benefits: nontaxable fringe benefits may include items such as adoption assistance, use of athletic facilities, holiday gifts like a ham or turkey, certain dependent care benefits, employee discounts, meals provided on business premises, and financial counseling or retirement planning services.
4. Business Use of Employer-Provided vehicle (personal use is taxable)
5. Child Support (alimony or spousal maintenance received is taxable income and deductible for the payer)
6. Life Insurance Proceeds (however any interest income received may be taxable)
7. Compensatory Damages paid for physical injuries or illness
8. Veteran’s Benefits
9. Housing or Housing Allowance provided for clergy: generally exempt from income tax but includable as income for self-employment tax purposes
10. Workers Compensation paid for an occupational sickness or injury
11. Medicare Benefits received, including basic (part A) and supplementary (Part B)
12. HAMP (Home Affordable Modification Program) Payments
13. Qualified Scholarship and Fellowship Benefits
14. Municipal Bond Interest (MUNI’S): Federally tax-exempt and often exempt from state and local taxes, but the rules can be quite complex
This article contains just a few selected items which are usually tax-exempt and are common to many taxpayers. It is in no way a comprehensive list nor is it intended to be. As always, please consult your tax advisor for any specific items or conditions to determine ultimate taxability in your particular situation.
