What Is Taxable Income? – TurboTax Tax Tips & Videos

overview While taxable income can include wages, salaries, bonuses, commissions and tips, it may not be as easy to define as you might think .

Woman artist drawing on a canvas.
This interview isn ’ t as easy to answer as you might think. Most people realize that taxable income includes wages, salaries, bonuses, commissions and tips. But as you can see from this list, “ income ” means a lot more than that to the IRS .
Taxable income includes:

  • Fees for acting as an executor, trustee or estate administrator.
  • Fees for jury duty.
  • Fees for serving on a board of directors.
  • Security deposits you received from a tenant.
  • Constructively received income: This is income that was available to you, even if it wasn’t in your possession. Let’s say you received a check in late December but didn’t deposit or cash it until January of the next year. You still must include the check in your taxable income for the year that you received the check, not the year that you deposited it.
  • Assignment of income: If you’ve authorized someone to receive income on your behalf, it’s includable in your income as soon as your agent receives it.
  • Alimony you receive from your ex-spouse for agreements entered into before 2019.
  • Cancelled debts: If you settled a credit card bill for less than the total balance you owe, for example, the credit issuer reports the amount that was forgiven to the IRS, and you must include it in your taxable income. (There are exceptions in cases of bankruptcy or insolvency. See below).
  • Awards, prizes and contest winnings.
  • Back pay, including amounts you received as the result of a successful suit for age discrimination.
  • Severance pay.
  • Strike benefits.
  • Unemployment benefits.
  • Capital gains. (There’s an important exception when it comes to the sale of your primary residence. See below.)
  • Freelance income.
  • Interest and dividends.
  • Your profit on a sale, even if the sale was to a friend or relative.
  • Royalties and license receipts.
  • The value of bartered, non-cash services. If you’re a lawyer and a plumber installs your kitchen sink in exchange for your drafting his will, each of you must declare the value of the other’s services as income.
  • Gambling, lottery, raffle and sweepstakes winnings. (Does that mean you can deduct gambling losses? Yes, as a miscellaneous itemized deduction. But you can’t deduct a loss greater than the amount you won. For example, if you lose $2,000 one night, and win $700 the following night, $700 is the most you can deduct on your return.)
  • Money you embezzled. That’s right! The amount you embezzle is taxable in the year you steal it. If convicted, you’ll owe taxes (plus accrued interest for non-payment) on the amount you stole.

now the good news. You do n’t owe Uncle Sam income taxes on :

  • Life insurance proceeds. If you’re the beneficiary, the insurance policy death benefit isn’t taxable to you.
  • Child support payments.
  • Accident and personal injury awards.
  • Workers compensation payments.
  • Disability benefits, if you paid the premiums for the policy. (If your employer paid for the policy, the disability payments are taxable.)
  • Interest income on municipal bonds issued in your state. (By contrast, interest on U.S. government bonds is federally taxable even though it isn’t subject to state income taxes.)
  • Cancelled debts that were discharged because of your bankruptcy or insolvency, for which you have received a Form 1099-C.
  • Scholarships and fellowship grants.
  • Foster care payments.
  • Social Security benefits, depending on your income.
  • The capital gain on the sale of your primary residence, which is a house you’ve owned and lived in for two of the five years prior to the sale. This gain is tax-exempt, except to the extent that it exceeds $250,000 if you’re a single taxpayer or $500,000 if you’re married filing jointly. (There are restrictions, however, if your home has been used as a rental property or a home office.)
  • Gifts. Money you received as a present isn’t taxable—but you do owe taxes on any income it produces. For example, if you receive bonds as a gift, you must report any interest the bonds earned after you received them.
  • Inherited assets, except to the extent that they would have been taxable income to the person from whom you inherited them. If you inherit an Individual Retirement Account, for example, the account balance is tax-deferred, but you owe taxes on the distributions you take from that account in the year you take them—just as the original IRA owner would have done.
  • Money that you rolled from one retirement account to another in a trustee-to-trustee transfer.
  • Your federal income tax refund. The money you got back from Uncle Sam is not taxable as income.

If you ’ re in doubt about whether or not some of your income is taxable, don ’ deoxythymidine monophosphate guess ! Take the clock to double-check. You ’ ll find more information in IRS Publication 525, ‘ Taxable and nontaxable Income. ”
Remember, with TurboTax, we ‘ll ask you bare questions about your life and help you fill out all the correct tax forms. With TurboTax you can be confident your taxes are done properly, from childlike to complex tax returns, no matter what your situation .

source : https://www.peterswar.net
Category : Finance

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