All income in the United States is taxable, unless a provision specifically excludes it. Here are seven of those exceptions.
Number 1 is disability insurance payments. They are nontaxable when you use after-tax dollars to buy supplemental disability insurance through your employer or through a separate insurance company. Workers’ compensation, compensatory damages for physical injury or sickness, and disability benefits from a public welfare fund or a no-fault car insurance policy are all nontaxable.
Second is employer-provided insurance. Usually, the value of accident or health plan coverage from an employer is not included in income.
Third is gift giving of up to $13,000 and gift receipts of any amount. Many gifts don’t impose a tax on the recipient. Parents can give each of up to three children a gift up to a certain amount, and the children will not have to pay tax on it. Other nontaxable gifts include tuition or medical expenses paid on someone’s behalf, political donations and gifts to charities.
Fourth is a life insurance payout, though some exceptions apply in complex situations.
Fifth is the sale of a principal residence for individuals and couples who have lived in it for at least two of the previous five years. A certain amount of capital gain income made from the sale can be excluded.
Six applies to inheritances. Beneficiaries of an estate that falls into the exempt category receive their inheritances tax-free. Estates worth more than the exemption are not taxed on the exempt amount.
And seventh, municipal bond interest. Income from municipal bonds is usually free of taxes at the federal level, and it’s free of state taxes for those who live in the state where the bonds were issued.
Read more: 7 Sources Of Nontaxable Income - Video | Investopedia http://www.investopedia.com/video/play/7-sources-nontaxable-income/#ixzz3qdf8wzLH
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