Generally, you are taxed on income that is available to you regardless of whether it is actually in your possession.
But there are some situations when certain types of income are partially taxed or not taxed at all.
Here are some examples of items that are NOT included in your income:
- Adoption expense reimbursements for qualifying expenses
- Funding of your Health Savings Account with a one-time direct transfer from your individual retirement plan, health reimbursement account, or health flexible spending account
- 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
Here are examples of items that may or may not be included in your income:
- 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 paid to you because of the death of the insured person 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.
Please contact us if you’d like more information about what income is nontaxable.