Getting Your Financial Ducks In A Row

What Income is Taxable?

It may be tough to figure out which parts of your income you’ve received over the year are taxable, and what parts are not taxable.  This is because certain kinds of income may seem like they should not be taxed (but they are), while other items of income seem like they should be taxed (but they’re not).

The IRS has published a Tax Tip to help understand which income is taxable and which is not.  The complete text of IRS Tax Tip 2013-12 is detailed below.

Taxable and Nontaxable Income

Most types of income are taxable, but some are not.  Income can include money, property or services that you receive.  Here are some examples of income that are usually not taxable:

Some income is not taxable except under certain conditions.  Examples include:

All income, such as wages and tips, is taxable unless the law specifically excludes it.  This includes non-cash income from bartering – the exchange of property or services.  Both parties must include the fair market value of goods or services received as income on their tax return.

If you received a refund, credit or offset of state or local income taxes in 2012, you may be required to report this amount.  If you did not receive a 2012 Form 1099-G, check with the government agency that made the payments to you.  That agency may have made the form available only in an electronic format.  You will need to get instructions from the agency to retrieve this document.  Report any taxable refund you received even if you did not receive Form 1099-G*.

For more information and examples, see Publication 525, Taxable and Nontaxable Income.  The booklet is available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

* jb Note: If you didn’t itemize your deductions on the previous year’s return and/or if you did not deduct state or local income taxes on the previous year’s return, your refund is likely not taxable income.  An example would be if you took the state & local sales tax deduction instead of state & local income taxes (you have to choose between the two) – in this case if you received a refund from the state or local taxing authority, this is usually not taxable in the current year.

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