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Tuesday Tax Tips •
2/8/11 |
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Taxable or Non-Taxable Income?
Believe it or not some income you receive may not be taxable! Generally, most income is considered taxable but there are situations when certain types of income are partially taxed or not taxed at all. Although not exhaustive the following are examples of items not included as taxable income:
· Adoption Expense Reimbursements for qualifying expenses
· Child support payments
· Gifts, bequests and inheritances
· Workers' compensation benefits
· Meals and Lodging for the convenience of your employer
· Compensatory Damages awarded for physical injury or physical sickness
· Welfare Benefits
· Cash Rebates from a dealer or manufacturer
Some income may be taxable under certain circumstances, but not taxable in other situations. Examples of items that may or may not be included in your taxable income are:
· Life Insurance If you surrender a life insurance policy for cash, you must include in income any proceeds that are more than the cost of the life insurance policy. Life insurance proceeds, which were paid to you because of the insured person’s death, are not taxable unless the policy was turned over to you for a price.
· Scholarship or Fellowship Grant If you are a candidate for a degree, you can exclude amounts you receive as a qualified scholarship or fellowship. Amounts used for room and board do not qualify.
· Non-cash Income Taxable income may be in a form other than cash. One example of this is bartering, which is an exchange of property or services. The fair market value of goods and services exchanged is fully taxable and must be included as income on Form 1040 of both parties.
All other items—including income such as wages, salaries, tips and unemployment compensation — are fully taxable and must be included in your income unless it is specifically excluded by law.
I love talking to clients and telling them an item of income is not taxable. If you have questions about whether income you receive is taxable or not please contact me. I may have good news for you!
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