Generally, most income you receive is taxable, according to the IRS. But there are some areas where certain types of income are partially taxed or not taxed at all. A complete list is available in IRS Publication 525, "Taxable and Nontaxable Income."
Some common examples of items not included in your income are:
- 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
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. Otherwise, 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.
Another example of income that you may or may not exclude is a 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.
These examples are not all-inclusive. For more information, visit the IRS Web site at www.irs.gov and view or download Publication 525 through the "Forms and Publications Finder." It is also available by calling toll free 1-800-TAX-FORM (1-800-829-3676) and at local IRS offices.
This daily Tax Tip has been provided by the Internal Revenue Service.