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Does the money you earned or received get taxed?

Having a grasp of what is nontaxable or taxable when doing your taxes could help you reduce your tax liability and possibly save you some money and stress. There are many ways that people receive an income, and some income may confuse people when it comes to tax season. Does the money you earned or received get taxed? A general rule of thumb when discerning whether something is taxable or not is: if it increases the money that you have, it is probably taxable. Though this may seem simple, it can never hurt to know as much as possible before you do your taxes! Here are some tips to help you figure out what is taxable and what is nontaxable!

Nontaxable

Nontaxable income is something that will not be taxed, whether you include it on your tax return or not. The IRS classifies the following as nontaxable income:

• Gifts, inheritance and bequests
• Non-taxable alimony payments (for divorce decrees that were finalized after 2018)
• Child support payments
• Cash rebates on items purchased from a retailer, dealer or manufacturer
• Most healthcare benefits
• Money reimbursed from qualifying adoptions
• Welfare payments

Certain circumstances may also qualify the following items as nontaxable

• Money received from a life insurance policy when someone dies. Cashing in a portion of or a whole a life insurance policy, however, is most likely taxable.
• Qualified scholarship money is not taxable, however, if that money is used for room and board or personal expenses, it is likely taxable.

For help determining whether specific incomes are nontaxable, call Brandt & Associates.

Income

The three general ways that income is received are money, services or property. You may have to pay tax on income that is not yet in your possession, such as a check not cashed by the end of the tax year received. The IRS requires you to declare all income on your tax return, including:

• Wages
• Salaries
• Commissions
• Unemployment pay
• Strike pay
• Rental income
• Alimony (for a divorce decree finalized before 2019)
• Royalty payments
• Stock options, dividends and interest
• Self-employment income

Fringe Benefits Income

Another type of income received is fringe benefits for services rendered. These benefits are typically considered taxable, even if someone such as a spouse or a dependent receives them. These taxable benefits may include:

• An off-site gym membership paid for by your company
• A company vehicle for personal use
• Holiday monetary gifts from your employer, including gift certificates
• Certain portions of dependent care paid for by employer
• Company-paid tuition fees over a certain amount
• Company-paid financial counseling fees
• Employer-paid group life insurance exceeding a certain amount

To find out these amounts or to see whether your fringe benefits qualify as taxable, call Brandt & Associates today.

Miscellaneous Income

Income that is often not identified as taxable but probably will need to be included on your tax return includes:

• Employer contributions to an unqualified retirement plan
• Market value of property acquired in exchange for services
• Disability retirement payments received from an employer-paid plan
• Injury or sickness payments received from an employer-paid plan
• Property and services for which you bartered
• Money and income from offshore accounts
• Remaining amount of a debt or loan that is cancelled or forgiven

To determine whether something is taxable or nontaxable or to ask questions about the incomes listed above, call Brandt & Associates! We will help you determine what to include on your tax return and what to leave off.