TAXABLE INCOME AND
NON-TAXABLE INCOME

Money, property, or services that are received are all considered income. Certain types of income may be taxed. However, some may not be taxed.

What is taxable income? It’s income that is taxed or income in which personal exemptions and deductions are taken out, including:

• 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
• gain from the sale of property, stocks and bonds, stock options, etc.
• pension and annuity 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

What is non-taxable income? It’s income that is not taxed under certain conditions and includes:

• 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
• income from qualifying scholarships

See Publication 525, Taxable and Nontaxable Income, for more information on what income is taxed or not taxed. Your tax preparer can assist you in properly reporting this income.

Refer to our Tax Glossary for a complete list of definitions and explanations of commonly used tax terms.