As you know, the income you earn is taxed by the government. Alas, not all income is treated the same. In fact, some is taken into account off limits and is not taxed at all.
The federal income tax is maybe the foremost abused, misunderstood and chaotic money subject there is. Abundant of the problem will be traced to the employment of terms that seem to mean one factor, but are treated like they mean something else. Income is one such term. One would think anything you earn is income. Whereas the IRS is happy to agree, it's important to comprehend there are some sorts of income that aren't taxed. Whereas this can be good news, it can be a small amount confusing.
Income related to the non-relatives is one area which will get confusing. If you receive kid support payments from an ex-spouse, I've got sensible news. They count as income, however aren't taxed. You would suppose the same would be true for alimony, but it is not. If you receive alimony from an ex-spouse, it is income and taxed. After all, your ex is meant to issue you a 1099. Ah, the IRS contains a funny funniness!
The quantity of lawsuits filed during this country is fairly staggering. If you are a plaintiff and win a lawsuit, you could be in for some shocking news. Any part of the judgment that is apportioned to compensatory damages, like pain and suffering, is not taxed as income. Any half of the award, but, that's attributed to lost earnings as a result of you missed work is considered income and taxed. Briefly, get hurt, however don't miss work!
Life insurance is another space where things get confusing. If you a relative dies and names you the beneficiary of a life insurance, the proceeds aren't taxed as income. They'll, however, be subject to the estate tax - an issue for one more article. On the other hand, if you've got a life insurance policy and money it out, you must pay taxes on any gain that exceeds the premiums you paid. This is why several people like to take loans against their policies. Loans are, in fact, not taxable.
If you win a scholarship or grant to obtain your education, congratulations! It is not taxable as income with a number of exceptions. If you use any of the money for room and board, you have got a tax problem. Yep, you've got to pay income tax on the amount bought the space and board. Welcome to the planet of tax!
When it comes to income tax, you'd be shocked how several varieties of income are not really taxable. Before you include all of your income on your 1040, it might be worth your time to work out if any of it will be excluded from your adjusted gross income.
Author Resource:
Riley Jones has been writing articles online for nearly 2 years now. Not only does this author specialize in Taxes Income, you can also check out his latest website about:
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