In most cases, the income you receive is taxable and must be reported on your federal income tax return. However, there are some instances when some types of income may not be taxable.
The following list offers some of the items that do not have to be included as taxable income:
- Adoption expense reimbursements for qualifying expenses
- Child support payments
- Receiving gifts, bequests and inheritances
- Workers’ compensation benefits (some exceptions may apply)
- 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. Some 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 generally 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 from income amounts you receive as a qualified scholarship or fellowship. Amounts used for room and board do not qualify for the exclusion.
- 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.
These examples are not all-inclusive. For more information, you can review Publication 525, Taxable and Nontaxable Income [1], or contact [2] a ShindelRock tax professional, and we can discuss your specific type of income.