What type of income do I pay taxes on?

What is Taxable income?

 According to the IRS, Publication 525, 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

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