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. 

 

   

CLIENT CHECKLIST  

 What to bring to your Liberty Tax client interview:  

 PERSONAL INFORMATION FOR EACH  

FAMILY MEMBER:  

o    Name  

o    Date of Birth  

o    Social Security Card  

   

ALSO: 

o    Last Year’s Tax Return  

o    Valid Driver’s License  

   

INCOME AND TAX INFORMATION:  

o    W-2’s  

o    Interest (1099-INT or substitute)  

o    Dividend (1099-DIV or substitute)  

o    Stock Sales (1099-B or Broker Statement)  

o    Self-Employment Income (1099-MISC or record of payments) 

o    Sale of a Personal Residence  

o    Rental Income  

o    Sale of any Business Assets  

o    Gambling or Lottery Winnings  

o    State Income Tax Refund  

o    Pension Income (1099-R, RRB-1099, CSA-1099)  

o    Any Estimated Taxes Paid  

o    Social Security or Railroad Retirement  

o    IRA or 401(k) Distribution (1099-R) 

o    Unemployment Compensation  

   

DEDUCTIONS/ADJUSTMENTS:  

o    Medical Expenses  

o    Real Estate and/or Personal Property Taxes  

o    Mortgage Interest  

o    Charitable Contributions  

o    Employee Business Expenses  

o    Gambling Losses  

o    Moving Expenses  

o    Traditional IRA Contributions  

o    Certain Education Expenses  

   

TAX CREDITS:  

o    Child Care Provider/Address and Social Security  

                Number or Employer Identification Number  

o    Adoption Expenses  

o    Retirement Savings Contributions