Taxable/Nontaxable Income

  • Taxpayers need to determine the difference between taxable and nontaxable income when filing their returns. Knowing how to report it properly helps reduce the tax liability.


    TAXABLE INCOME

    • Wages, salaries, tips, bonuses, vacation pay, severance pay, commissions
    • Interest and dividends
    • Certain types of disability payments
    • Unemployment compensation
    • Jury pay and election worker pay
    • Strike and lockout benefits
    • Bank “gifts” for opening or adding to accounts if more than “nominal” value
    • Cancellation of debt (unless excludable by law or regulation)
    • Alimony
    • Recoveries of items deducted in previous year
    • Gains from sales of property, stocks and  bonds, stock options, etc.
    • Pensions and annuities distributions (amounts not contributed by taxpayer with after-tax dollars)
    • Traditional IRA distributions (amounts deducted in prior years)
    • Rental income, farm income, business income
    • Royalties
    • Trust/estate income, Partnership/S corporation income
    • Executor’s commissions
    • Social Security benefits (above the base amount)
    • Notary fees
    • Most court awards or damages
    • Fees or property received for services or barter income
    • Prizes, awards, gambling winnings, and illegal income
    • Certain scholarships, fellowships and grants

    NONTAXABLE INCOME

    • Gifts and most inheritances
    • Life insurance proceeds
    • Child support
    • Certain veteran’s benefits
    • Dividends on veteran’s life insurance loans
    • Insurance reimbursement of medical expenses not previously deducted
    • Welfare payments
    • Compensatory damages for personal physical injury or physical illness
    • Workers’ compensation
    • Some qualified pension distributions for Public Safety Officers

    Liberty Tax professionals are available for your tax needs. Please call your local Liberty Tax office for further information.