Non-taxable income

Non-Taxable Income

If you try to determine the difference between taxable and non-taxable income, remember one basic fact: All income that is not specifically excluded by law is taxable. In essence, any money you receive in the form of wages or tips for work is taxable. In addition, any revenue you earn from property or services, whether cash or non-cash, is also taxable. For example, if you exchange non-cash goods with another party, both of you must include in your tax return the market value of the items. The law excludes certain types of income from taxation, such as: Payouts for life insurance. These are usually not taxable if they are paid to you. However, the amount received above the cost of the policy will be taxed if you cash out a life insurance policy.

Any income from a scholarship is usually not taxable. The money you use for education costs such as books and tuition is not taxed, but it is used for room and board. Payments made to you by an agency may not be taxable if they fall into one of the following categories: Inheritance gifts, child support payments, welfare benefits, compensation for physical injury, cash discounts offered by the manufacturer of the product, reimbursement of expenditure incurred by adoption. If you received a reimbursement from local or state taxes, the money may be taxable. A third party agency may submit a Form 1099-G by mail or electronically. To report any taxable refunds you may have received, you should use this form. Even if you do not receive the form, you still have to report the income, so you should contact the agency to find out how to obtain Form 1099-G.