Phoenix CPA | Taxable or not?
Did you know that all income is taxable unless there is a specific law that excludes it? Here are some basic rules regarding different types of income and their taxability.
- Taxed income – Taxable types of this income include money you earn such as wages and tips. It also includes bartering income (an exchange of property or services). It also includes property or services received at their fair market value.
- Life insurance – Proceeds paid from a life insurance policy due to the death of the insured person are usually not taxable. However, life insurance proceeds from redeeming a life insurance policy for cash are. Any amount your get that is more than the cost of the policy is taxable.
- Qualified scholarships – In most case, income from this type of scholarship is not taxable. Amounts from these scholarships used for tuition and required books and materials are not taxable, but amounts used for room and board are taxable.
- State income tax refunds – This type of income can be taxable depending on your prior year’s tax return. If you itemized your deductions and took a deduction for all of the state income taxes you paid, then the refund will be taxable. If you did not itemize, the refund is generally not taxable.
- Alimony – Alimony received is generally taxable. Alimony paid is also deductible to the spouse paying it.
- Non-Taxed income – Some other types of income that are generally not taxable include: gifts and inheritances, child support payments, welfare benefits, damage awards for physical injury or sickness, cash rebates from a dealer or manufacturer for an item purchased, and reimbursements for qualified adoption expenses.
If you have any questions regarding this post or would like more information, please do not hesitate to contact us at Dusseau & Makris, PC, your Phoenix CPA firm.