What should you report as taxable income on your tax return?
What is Taxable and Nontaxable income?
According to Publication 525 form the IRS, income you receive in the form of money, property, or services can be taxable or nontaxable. Any income that is considered taxable must be included on your tax return and it is subject to tax. Nontaxable income may have to be reported on your tax return but is not subject to tax.
Taxable Income:
Below is a list of some taxable income that must be included on your tax return if you received it during the year:
1. Employee Compensation: You should receive a W2 that includes all the pay you received for your services as an employee. These include:
Wages
Salaries
Commissions
Fees
Tips
Back pay awards
Accrued leave payment
FMV of Virtual currency provided by your employer
Bonuses and awards
Fringe Benefits (unless you pay FMV for them or they’re specifically excluded by law)
Disability Pensions (exceptions apply)
2. Self-employment income/ independent Contractors/Gig workers: If you are self-employed, and made more than $400, you are required to file a tax return and your income is subject to tax. You will receive Form 1099-K, 1099-MISC, or 1099-NEC if your income is greater than $600. Self-employment income is reported on schedule C. You can also deduct qualified expenses to deduct your self-employed income.
3. Canceled Debts: You must include in income any cancelled or forgiven debt. You may receive form 1099-C if your debt of $600 or more is cancelled or forgiven by a federal government agency, financial institution, or credit union (exceptions apply).
4. Unemployment Benefits Compensation
5. Business Income: Income received from the sale of products or services. All businesses except partnerships must file an annual income tax return. Partnerships file an information return only but the partner’s distributive share is taxable income and it is reported on Form 1040- U.S. Individual Income Tax Return.
6. Rental Income: Income you receive for the use or occupation of your property. It is reported on Schedule E.
7. Royalties: Royalties from copyrights, patents, and oil, gas, and mineral properties are taxable as ordinary income, and reported in Part I of Schedule E.
8. Hobby activities that generate income
9. Gambling winnings
10. Lotteries and raffles
11. Found property reported at fair market value
12. Scholarships and fellowships
13. Punitive damages in most cases
14. Jury duty
15. Prizes and awards
16. Pulitzer, Nobel, and similar prizes (exceptions apply)
17. Sale of personal items: Such as a car, refrigerator, furniture, stereo, jewelry, or silverware
18. Dividend Income: Corporations pay their shareholders a percentage out of the profits for holding stocks at their companies. These payments are taxable and sent to taxpayer on Form 1099-DIV
19. Interest Income: You would receive Form 1099-INT if you earned more than $10 in interest from any financial institution
20. Capital Gains: Short-term capital gains are taxed as ordinary income, and long-term gains are taxed at a lower rate
Nontaxable income:
Nontaxable income won’t be taxed but may need to still be reported on your tax return. Below is a list of some nontaxable income:
1. Employee achievement awards: for tangible personal property other than cash or gift certificate up to $1,600 ($400 for awards that aren’t qualified plan awards)
2. Government cost-of-living allowances for working abroad
3. Nonqualified deferred compensation plans
4. Life Insurance Proceeds
5. Child support payments
6. Stimulus Checks due to coronavirus
7. Advance child tax credit payments
8. Adoption Assistance incurred by your employer
9. Athletic Facilities services provided by your employer
10. Dependent Care Benefits provided by your employer (there are limits)
11. Educational Assistance provided by your employer up to $5,250
12. Employer-Provided Group-Term Life Insurance up to $50,000
13. Meals and Lodging provided by your employer (if conditions are met)
14. Qualified retirement planning services provided to you (and your spouse) by your employer
15. Workers' Compensation
16. Welfare and Other Public Assistance Benefits
17. Compensatory damages for personal physical injury or physical sickness
18. Gifts and inheritances
19. Property damage Payments (if not more than the adjusted basis in the property)
20. Sale of home (the gain of your main home- there are limits)
21. Scholarships and fellowships
The list goes on. If. you would like to know if the income you received for the year is taxable or no, and it is not stated on this post, you can reach out to us via email at contact@ztaxllc.com, or via phone/text at (347) 720-2224. We can also provide a FREE federal estimate with no obligation to file with us if you are no happy.
Source:
IRS.GOV. Publication 525. “Taxable and nontaxable income.” Jan 13, 2022.
