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Not Taxable Income
By Dr. John L. Stancil
Tax Analyst, WebTaxCenter.com
The Internal Revenue Code starts off with these words "There is hereby imposed on the taxable income of..." with the emphasis here on the word "taxable." Not all income is considered taxable. Some notable exclusions from your income follow.
Unrealized income is simply income you have not yet received. For example, if you own 100 shares of stock in a company and the price of the stock goes up $5 you have $500 in unrealized income. This is not taxable income until you sell the stock.
Self-help income is actually money you save by doing something yourself. For example, if someone quotes you a price of $1,000 to paint your house and you decide to do it yourself you have saved that amount. This is not taxable income.
The selling price of property is not taxable. You are taxed on the gain from the sale of the property, however. The gain is determined by subtracting your cost basis from the proceeds of the sale.
Generally speaking, the following items are not taxable income. However, there may be circumstances where some or all of the income is taxable.
- Gifts and inheritances
- Life insurance proceeds
- Public assistance payments
- Qualified adoption expense payments
- Rebates on purchased products
- Payments for physical injury and sickness
- Discharge of debts in bankruptcy or insolvency
- Gain on the sale of a personal residence
- Certain employee fringe benefits
- Foreign earned income
- Scholarships paying qualified higher education expenses
- Certain meritorious achievement awards
- Some social security benefits
- Foster care payments
- Energy conservation subsidies
- Interest received on state and local government bonds
Dr. John L. Stancil, a tax analyst for WebTaxCenter.com, has been a member of the Florida Southern College faculty since 1998. He received his bachelors degree from Mars Hill College and holds a M.B.A. from the University of Georgia. He later earned his doctorate in accounting from the University of Memphis. He holds four professional certifications, including CPA, CMA, CFM and CIA. Stancil has received the Florida Institute of CPAs 2005 Outstanding CPA in Public Service Award. (This award is given annually to a Florida CPA who has demonstrated significant contributions through community and civic activities.) He has also been recognized as the Expert of the Month on several occasions by allexperts.com.
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