Most income is taxable. Also, you generally have to pay tax if you sell something for more than your basis (the amount you paid for).
Most common taxable income
- Wages, salaries and tips: the income what you get in exchange for your work
- Extra cash: you have to pay tax on the income from your side job
- Alimony: if you get alimony, the payment you receive is taxable. If you paid alimony during the year, you can deduct it.
- Unemployment benefits: unemployment compensation is fully taxable
- Jury duty pay: jury duty pay is taxable income, however, you can deduct the amount of money you turn over to your employer in exchange for continuing to receive a salary pay
- Pension: pension and annuity payments are taxable, however, there might be a tax-free portion of it
- Awards: Awards you receive for your performance from your employee are taxable. However, gifts you receive for the length of service or other achievements are tax-free if the employee’s cost doesn’t exceed $1,600.
- Barter: the FMV of the property or services you receive in exchange for another property or service is taxable
- Disability benefits: if your employee pays the premiums for your disability insurance, the payments you receive are fully taxable. However, if you paid the premiums, the payments you receive are tax-free. You don’t have to pay tax on disability connected to government service (e.g veterans’ disability)
- Prizes: all prizes you won during the tax year are taxable
Most common tax-free income
- Auto rebates: this is actually a reduction in the price of the car, so it’s not a taxable income
- Carpool receipts: if you drive a carpool, the payments you receive from your passengers are not taxable, it is considered as reimbursement for your expenses
- Child support payments: these payments are tax-free as the payor can’t deduct child support
- Casualty insurance proceeds: you don’t have to report your income if you are reimbursed for your loss like a car accident or house fire
- Combat pay: combat pay is not subject to income tax
- Damages: if you receive compensation for personal physical injury or sickness, it is tax-free. However, if you receive it for lost wages or profits, you have to pay tax
- Gifts: you don’t have to pay tax on gifts you receive from family members or friends. If there is a tax liability on the gift, the giver owes the tax
- Health and accident insurance benefits: if you are reimbursed for medical expenses you paid out of pocket, the money you receive is not taxable.
- Inheritances: your inheritance is
Your inheritance is not taxable.
Any money or property you inherit is tax-free unless the item is considered to be income in respect of a decedent (IRD). Items like retirement accounts are usually considered to be IRD. If you inherit a traditional IRA or company retirement benefits, you must pay tax on the income just as the deceased would have had to do.