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
