tax-free-money Wouldn’t it be nice to not worry about taxes when it comes to all the income you receive? Believe it or not, there are many types of incomes that Uncle Sam will not get a penny from in taxes. Here are some of the more common type of incomes you do not want to mistake to be taxable: Child Support Payments - If you receive support payments, just remember that these are never taxed and shouldn’t be reported as income on your tax return. Income from Car Pooling - This may or may or not be taxable. If you carpool using your vehicle and receive income from other passengers, the income is treated as being a reimbursement for expenses (thus exempt from tax). However, if your intentions are to make a profit, then it becomes taxable income and needs to be reported on your return. Scholarships - If you are aiming at getting a degree, you may be able to exclude scholarship income on your return. The catch is that you must use those funds toward your education. Qualified expenses include tuition and fees to enroll or attend and educational institution, books, supplies, and equipment required for courses at the educational institution. Note that any scholarship income you use for room and board does not qualify as an educational fee and are taxable. Life Insurance Proceeds - Life insurance proceeds paid to you because of the death of an insured person are not taxable unless the policy was turned over to you for a price. Court Awards for Individual Injury or Physical Sickness - Do not include in your income compensatory damages for personal physical injury or physical sickness. However, punitive damages (in most cases), interest on any award, or compensation for lost wages or profits should be added to income. Worker’s Compensation - Amounts you receive as workers’ compensation for an occupational sickness or injury are tax-free if they are paid under a workers’ compensation act. This also applies to survivors’ compensation. Welfare Benefits - Governmental benefit payments from public welfare funds are not taxed on. These include cash, medical (and Medicare benefits), and food stamps. Gifts and Inheritances - Generally speaking, income is excluded from your return the property that you receive as a gift or from an inheritance. However, keep in mind that if the property you receive generates interest, dividends, or rents, that income is taxable. Also, an inherited pension IRA may be taxable. Interest on Roth IRAs - Roth IRA are retirement accounts that you can open at most banks. It works like a savings account, but the interest you make on it every year is not taxed. Unlike a traditional IRA account, when its retirement-time and you want to withdrawal money, none of the money you take out of a Roth IRA is ever taxable (that’s right - zippo!). And to top that off, if you make under $28,250 (or under $56,500 filing jointly), you may be able to get a credit on your return for up to $1,000 ($2,000 if filing jointly) depending on amount you put into a Roth IRA and your income for the year. So not only do you not get taxed on the interest, but you can get additional money in the form of a credit on your return from the IRS at tax time - what a deal! Vincent Mangiapane, EA Federal Analyst, Taxbrain