WSMV Channel 4 Tax Tip: Taxable or non-taxable income?

A tax tip from IRS.gov

Although most income you receive is taxable and must be reported on your federal income tax return, there are some instances when income may not be taxable.

The IRS offers the following list of items that do not have to be included as taxable income:

- Adoption expense reimbursements for qualifying expenses

- Child support payments

- Gifts, bequests and inheritances

- 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

- Workers' compensation benefits (some exceptions may apply; see Publication 525, Taxable and Nontaxable Income)

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 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.

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.

These examples are not all-inclusive. For more information, see Publication 525, Taxable and Nontaxable Income, which can be obtained at the IRS.gov website or by calling the IRS at 800-TAX-FORM (800-829-3676).

Link: IRS Publication 525, Taxable and Nontaxable Income

Remember that all of the web page addresses for the official IRS website, IRS.gov, begin with http://www.irs.gov. Don't be confused or misled by Internet sites that end in .com, .net, .org or other designations instead of .gov. The address of the official IRS governmental Web site is http://www.irs.gov/.