Tax Filing Help

IRS Nontaxable Income

There are many types of income as classified by the IRS and tax laws. There are earned income such as wages, unearned income, taxable income and nontaxable income as well as other subcategories of income. Fortunately for most taxpayers, most income are reported correctly on tax forms such as W-2 that taxpayers receive every January for wages and earned income that are taxable. Most of the time taxpayers don't have to worry about what income are taxable and what income are not taxable. Taxable income has to be included as taxable adjusted gross income on the tax return filed with the IRS while nontaxable income are not taxed but still should to be reported.

What are IRS nontaxable income?

The IRS nontaxable income are income that are exempt from federal income tax. Usually a tax return includes non taxable income as well as taxable income. However, the nontaxable income portion will not be taxed.

List of IRS nontaxable income

Some of the nontaxable income allowed by the IRS are:

  • child support payments

  • life insurance proceeds

  • Welfare benefits and public assistance (certain TANF or temporary asisstance for needy families payments)

  • Worker's Compensation

  • Veterans' benefits

  • Gifts, bequests, and inheritances

  • Accident and health insurance proceeds

  • Supplemental security income or SSI

  • Federal income tax refunds

  • Interest on state or local government obligations (municipal bonds)

  • Military allowances

  • Moving expenses reimbursements

  • Compensatory damages awarded for physical injury or sickness