What Income Is Nontaxable?

Generally, you are taxed on income that is available to you regardless of whether it is actually in your possession, but there are some situations when certain types of income are partially taxed or not taxed at all.

Here are some examples of items that are NOT included in your income:

• Adoption expense reimbursements for qualifying expenses
• Funding of your Health Savings Account (HSA) with a one-time direct transfer from your qualified individual retirement plan (Roth IRA or IRA, but not an ongoing SEP IRA or SIMPLE IRA), an Archer MSA, health reimbursement account (HRA), or health flexible spending account (FSA), but not from an ongoing SIMPLE IRA and SEP IRA
• Child support payments
• Gifts, bequests, and inheritances
• Workers' compensation benefits
• Meals and lodging for the convenience of your employer
• Compensatory damages awarded for physical injury or physical sickness
• Welfare benefits
• Cash rebates from a dealer or manufacturer

Here are examples of items that may or may not be included in your income:

• Life Insurance. If you surrender a life insurance policy for cash, you must include in income any proceeds that are more than the cost of the life insurance policy. Life insurance proceeds paid to you because of the death of the insured person are not taxable unless the policy was turned over to you for a price.
  
• Scholarship or Fellowship Grant. If you are a candidate for a degree, you can exclude amounts you receive as a qualified scholarship or fellowship. Amounts used for room and board do not qualify.
  
• Non-cash Income. Taxable income may be in a form other than cash. One example of this is bartering, which is an exchange of property or services. The fair market value of goods and services exchanged is fully taxable and must be included as income on Form 1040 of both parties.

Please contact us if you'd like more information about what income is nontaxable. As always, we are here to help!

Security Tax Services LLC

North Sound                                       South Sound

2802 Wetmore Ave, Suite 212           33530 1st Way S, Suite 102

Everett, WA 98201                             Federal Way, WA 98003

425.339.2400                                     253.237.0751

fax 425.259.1099                               fax 253.237.0701

www.securitytaxservices.com