Is Your Income Taxable or Non-Taxable? You might be surprised!

According to the US Tax Laws, generally, most of your income is considered taxable but in some situations, certain types of income can be either only partially taxable or not at all taxable.

In order to help you understand the difference between taxable and non-taxable income, here are some familiar examples of income not taxable by law:

Ø  Adoption Expense Reimbursements (qualifying expenses only)

Ø  Cash Rebates

Ø  Child Support Payments

Ø  Compensatory Damages for Physical Injury or Sickness

Ø  Gifts & Inheritances

Ø  Meals & Lodging for the convenience of your employer

Ø  Welfare Benefits

There are times when certain types of income are taxable and not in others. Such items include:

Ø  Life Insurance: Surrendering a life insurance policy for cash would mean you must report as income any part of it above the cost of the policy itself. However, if you are paid the life insurance policy due to the insured’s death, it is not taxable income unless it was given to you for a price.

Ø  Non-cash Income: Non-cash income could be considered taxable in some situations. For example, an exchange of property or services, or bartering, should be included in taxable income on a Form 1040 by both parties at the fair market value of the goods or services.

Ø  Scholarship Grant: If you are studying toward a degree, amounts you receive as qualified scholarships can be excluded from taxable income. However, any amount used for room and board do not qualify for exclusion.

Unless specifically excluded by law, all other income including wages, tips, salaries and unemployment compensation must be reported as it is fully taxable by law. To find out more about taxable tips please read this article: Don’t Forget The Tab – Your Tips Are Taxable!

The examples given are not all-inclusive. For more information on how this affects your taxable income, please contact one of our knowledgeable Tax Patriots to help you determine which parts of your income may or may not be taxable.

Contact us for your FREE consultation today and get the most out of your taxes!


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