Tax tip: What income is taxable? - Spokane, North Idaho News & Weather KHQ.com

Tax tip: What income is taxable?

SPOKANE, Wash. - While most income you receive is generally considered taxable, there are some situations when certain types of income are partially taxed or not taxed at all.

Some common examples of items that are not included in your income are:

  • 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
  • Economic Stimulus Payment received in 2008

Some income may be taxable under certain circumstance, but not taxable in other situations. Examples of items that may or may not be included in your 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 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.

All other items -- including income such as wages, salaries and tips -- must be included in your income, unless it is specifically excluded by law.

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, visit the IRS Web site at IRS.gov to view or download Publication 525, Taxable and Nontaxable Income from the Forms and Publications section or call 800-TAX-FORM (800-829-3676).

Link

  • Publication 525, Taxable and Nontaxable Income (PDF 1178.2KB

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/.

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