Posts Tagged ‘taxable income’

Taxable or Non Taxable Income???

Wednesday, February 12th, 2014

The exclusive purpose for the information which is provided from this website is to disseminate information, and not to provide tax advice

IRS Tips about Taxable and Nontaxable Income

 

Are you looking for a hard and fast rule about what income is taxable and what income is not taxable? The fact is that all income is taxable unless the law specifically excludes it.

Taxable income includes money you receive, such as wages and tips. It can also include noncash income from property or services. For example, both parties in a barter exchange must include the fair market value of goods or services received as income on their tax return.

Some types of income are not taxable except under certain conditions, including:

  • Life insurance proceeds paid to you are usually not taxable. But if you redeem a life insurance policy for cash, any amount that is more than the cost of the policy is taxable.
  • Income from a qualified scholarship is normally not taxable. This means that amounts you use for certain costs, such as tuition and required books, are not taxable. However, amounts you use for room and board are taxable.
  • If you got a state or local income tax refund, the amount may be taxable. You should have received a 2013 Form 1099-G from the agency that made the payment to you. If you didn’t get it by mail, the agency may have provided the form electronically. Contact them to find out how to get the form. Report any taxable refund you got even if you did not receive Form 1099-G.

Here are some types of income that are usually not taxable:

  • 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 you buy
  • Reimbursements for qualified adoption expenses

For more on this topic see Publication 525, Taxable and Nontaxable Income. You can get it at IRS.gov or call to have it mailed at 800-TAX-FORM (800-829-3676).

Additional IRS Resources:

IRS YouTube Videos:

Is Your Mortgage Debt Forgiveness Taxable Income To You?

Wednesday, March 13th, 2013

The exclusive purpose for the information which is provided from this website is to disseminate information, and not to provide tax advice.

Important Facts about Mortgage Debt Forgiveness

 

If your lender cancelled or forgave your mortgage debt, you generally have to pay tax on that amount. But there are exceptions to this rule for some homeowners who had mortgage debt forgiven in 2012.

Here are 10 key facts from the IRS about mortgage debt forgiveness:

1.   Cancelled debt normally results in taxable income. However, you may be able to exclude the cancelled debt from your income if the debt was a mortgage on your main home.

2.   To qualify, you must have used the debt to buy, build or substantially improve your principal residence. The residence must also secure the mortgage.

3.   The maximum qualified debt that you can exclude under this exception is $2 million. The limit is $1 million for a married person who files a separate tax return.

4.   You may be able to exclude from income the amount of mortgage debt reduced through mortgage restructuring. You may also be able to exclude mortgage debt cancelled in a foreclosure.

5.   You may also qualify for the exclusion on a refinanced mortgage. This applies only if you used proceeds from the refinancing to buy, build or substantially improve your main home. The exclusion is limited to the amount of the old mortgage principal just before the refinancing.

6.   Proceeds of refinanced mortgage debt used for other purposes do not qualify for the exclusion. For example, debt used to pay off credit card debt does not qualify. 

7.   If you qualify, report the excluded debt on Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness. Submit the completed form with your federal income tax return.

8.   Other types of cancelled debt do not qualify for this special exclusion. This includes debt cancelled on second homes, rental and business property, credit cards or car loans. In some cases, other tax relief provisions may apply, such as debts discharged in certain bankruptcy proceedings. Form 982 provides more details about these provisions.

9.   If your lender reduced or cancelled at least $600 of your mortgage debt, they normally send you a statement in January of the next year. Form 1099-C, Cancellation of Debt, shows the amount of cancelled debt and the fair market value of any foreclosed property.

10. Check your Form 1099-C for the cancelled debt amount shown in Box 2, and the value of your home shown in Box 7. Notify the lender immediately of any incorrect information so they can correct the form.

Use the Interactive Tax Assistant tool on IRS.gov to check if your cancelled debt is taxable. Also, see Publication 4681, Canceled Debts, Foreclosures, Repossessions and Abandonments. IRS forms and publications are available online at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Additional IRS Resources:

IRS YouTube Videos:

 

Is The Early Distribution From Your Retirement Plan Taxable???

Tuesday, February 21st, 2012

The exclusive purpose for the information which is provided from this website is to disseminate information, and not to provide tax advice.

As frustrating as it may be, the best answer to this question may be “it depends!”  It depends on what?  The facts and circumstances of your particular situation.  It can be relative simple, i.e. an IRA plan rollover that is completed in 60 days, you fulfilled all of the requirements for the rollover,  and you had no access to the funds during the 60 day time period = not taxable, or it can be somewhat more complicated, i.e. you were age 53 when you made the withdrawal but you had a significant “cost basis” in your IRA, but you did not keep the required files and records to quantitatively determine your “cost basis.”   One of the best reference documents which is available on this subject is IRS Publication 590, “Individual Retirement Arrangements”.  (http://www.irs.gov/pub/irs-pdf/p590.pdf )  (more…)

Social Security Benefits – Is Your Income Taxable?

Thursday, February 9th, 2012

The exclusive purpose for the information which is provided from this website is to disseminate information, and not to provide tax advice.

While all of your Social Security benefit income is “reportable” (is required to be reported) on your income tax returns, none, only a portion, or all of it will be ”taxable.” (Included in your “Taxable Income” calculation).  How is this amount determined?  It depends on your individual circumstances, your marital status, your age, and the income that you have earned in the previous year.

Seven Tips to Help You Determine if Your Social Security Benefits are Taxable 

 

Many people may not realize the Social Security benefits they received in 2011 may be taxable. All Social Security recipients should receive a Form SSA-1099 from the Social Security Administration which shows the total amount of their benefits. You can use this information to help you determine if your benefits are taxable. Here are seven tips from the IRS to help you:

1.   How much – if any – of your Social Security benefits are taxable depends on your total income and marital status.

2.   Generally, if Social Security benefits were your only income for 2011, your benefits are not taxable and you probably do not need to file a federal income tax return.

3.   If you received income from other sources, your benefits will not be taxed unless your modified adjusted gross income is more than the base amount for your filing status (see below).

4.   Your taxable benefits and modified adjusted gross income are figured on a worksheet in the Form 1040A or Form 1040 Instruction booklet. Your tax software program will also figure this for you.

5.   You can do the following quick computation to determine whether some of your benefits may be taxable:

  • First, add one-half of the total Social Security benefits you received to all your other income, including any tax-exempt interest and other exclusions from income.
  • Then, compare this total to the base amount for your filing status. If the total is more than your base amount, some of your benefits may be taxable.

6.   The 2011 base amounts are:

  • $32,000 for married couples filing jointly.
  • $25,000 for single, head of household, qualifying widow/widower with a dependent child, or married individuals filing separately who did not live with their spouse at any time during the year.
  • $0 for married persons filing separately who lived together during the year.

7.   For additional information on the taxability of Social Security benefits, see IRS Publication 915, Social Security and Equivalent Railroad Retirement Benefits. You can get a copy of Publication 915 at www.irs.gov or by calling 800-TAX-FORM (800-829-3676).

Link: 

Publication 915, Social Security and Equivalent Railroad Retirement Benefits.

Videos: 

Is Your Social Security Taxable?   English | Spanish | ASL

 

Did You Have NON TAXABLE Income Last Year?

Tuesday, February 7th, 2012

The exclusive purpose for the information which is provided from this website is to disseminate  information, and not to provide tax advice.

While the general rule for reporting your income on your tax returns is to report “All income from whatever source it is derived”, believe it or not, there are categories of income which are not reportable and not taxable.  Here’s the straight scoop: 

Taxable or Non-Taxable Income? 

 

Although most income you receive is taxable and must be reported on your federal income tax return, there are some instances when income may not be taxable.

The IRS offers the following list of items that do not have to be included as taxable income:

  • Adoption expense reimbursements for qualifying expenses
  • Child support payments
  • Gifts, bequests and inheritances
  • Workers’ compensation benefits (some exceptions may apply; see Publication 525, Taxable and Nontaxable Income)
  • 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

Some income may be taxable under certain circumstances, but not taxable in other situations. Examples of items that may or may not be included in your taxable income are:

  • Life insuranceIf 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, which were paid to you because of the insured person’s death, are generally not taxable unless the policy was turned over to you for a price.
  • Scholarship or fellowship grantIf you are a candidate for a degree, you can exclude from income amounts you receive as a qualified scholarship or fellowship. Amounts used for room and board do not qualify for the exclusion.
  • 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.

All other items—including income such as wages, salaries, tips and unemployment compensation — are fully taxable and must be included in your income unless it is specifically excluded by law.

These examples are not all-inclusive. For more information, see Publication 525, Taxable and Nontaxable Income, which can be obtained at the IRS.gov website or by calling the IRS at 800-TAX-FORM (800-829-3676).

Link:  IRS Publication 525, Taxable and Nontaxable Income