• Money
    • Budget
    • Shop
    • Travel
    • Stories
  • Career
    • Advice
    • Entrepreneurship
    • Freelance
    • Small Business
  • Investing
    • General
    • IRA + 401K
    • Stocks + Bonds
    • Retirement Planning
    • Estate
  • The Basics
    • Student Loans
    • Credit Cards
    • Debt
    • Taxes
    • More
  1. Home
  2. The Basics
  3. Taxes
  4. What Is Exempt and Non-Reportable for Taxes?

What Is Exempt and Non-Reportable for Taxes?

September 24, 2010
By: Vicki A. Benge
  • Share
  • Share on Facebook

Under federal tax guidelines, exempt income, meaning nontaxable, does not always mean you do not have to report it. The Internal Revenue Service considers income as money, property or services. The source of the income determines tax status and only a few types don't end up on income tax forms.

Tax Time Closeup
Instructions for income tax forms show the types of income you must report.
credit: Terrance Emerson/iStock/Getty Images

Gifts, Inheritances, and Life Insurance

Income you get as the beneficiary of a life insurance policy is not taxable. Similarly, gifts passed down through a will, or an inheritance, are generally not reported as income. You must report property that earns interest or otherwise produces income.

Child Support

The IRS does not consider child support payments income. However, it does expect you to report alimony payments. If you get both, separate the two and report only the portion mandated as alimony.

Workers' Compensation

Workers' compensation benefits are tax-exempt. If a worker is temporarily off work due to a job-related injury or illness, benefits are nontaxable. However, if a worker retires due to a job-related injury or illness, part of the benefits may be taxable if it reduces the taxpayer's Social Security amount.

Video of the Day

Some Bond Interest

You don't always have to report all of the accumulated interest on U.S. savings bonds. For example, if you inherit bonds, the interest you report from Form 1099-INT is just what you earned in the previous tax year. It doesn't reflect anything reported before by the decedent. In addition, earnings on U.S. savings bonds are exempt from all state and local taxes. Some state and municipal bonds earn tax-exempt interest. These amounts go on Line 8b of Form 1040.

Individual Retirement Accounts

Interest earned through a traditional individual retirement account isn't taxable income until you begin to take distributions. Earnings from a Roth IRA are not taxable income.

Education Assistance

Scholarships and fellowships don't count as taxable income as long as the money is applied to tuition or course-required fees, books, and equipment. Any portion of it used to cover something else, like living expenses, is taxable. The IRS also expects you to report scholarship prizes from contests that aren't specifically for education expenses.



Show Comments

Related Articles

Does VA Compensation Affect Social Security Disability?

Does VA Compensation Affect Social Security Disability?

The Basics
Insurance
By: Tom Streissguth
What Items Are Exempt From Sales Tax in Texas?

What Items Are Exempt From Sales Tax in Texas?

The Basics
Taxes
By: Shane Hall

PARTNER CONTENT

7 Habits of Highly (Financially) Effective People

7 Habits of Highly (Financially) Effective People

If I Am on Welfare Do I Report it on My Taxes?

If I Am on Welfare Do I Report it on My Taxes?

The Basics
Taxes
By: Selena Robinson
When Can I Deduct Mileage on My Taxes?

When Can I Deduct Mileage on My Taxes?

The Basics
Taxes
By: Christopher Raines
What Is the New Jersey SUI/SDI Tax?

What Is the New Jersey SUI/SDI Tax?

The Basics
Taxes
By: Jeannine Mancini

Get Weekly Savings& Finance Tips.

  • Money
  • Career
  • Investing
  • The Basics
  • About
  • Contact Us
  • Terms
  • Privacy Policy
  • Copyright Policy
© 2018 Leaf Group Ltd. Leaf Group Media

Get Weekly Savings
& Finance Tips.

Money Made Easier.

Please enter a valid email.