Believe it or not, yes! Some forms of income are excluded from taxes. Let’s take a closer look at some income exclusions:
Health and Life Insurance Exclusions
When you got your full-time job, you probably negotiated for the salary and the benefits you wanted. While your wages and some benefits are taxable to you, the health insurance premiums that your employer pays for you are not. The cost for up to $50,000 of life insurance is excluded as well.
Social Security Benefits and Supplemental Security Income
Depending on your overall income, some social security benefits are excluded from income. Supplemental security income for those who are low-income, and disabled is also not taxed.
Injury and Illness-Related Income
Were you injured on the job? Workers’ compensation payments are not taxed, as well as some disability benefits you may receive from insurance policies. Also, if you take money out of a health savings account specifically for medical expenses, you will not be taxed on those distributions.
Estate and Gift Tax Exclusions
Income and/or property received through an estate is excluded from taxes up to $12,920,000, and cash or property received as a gift is excluded up to $17,000. Also, if someone paid for your education or medical expenses and paid directly to the institution the money is owed, it will not be considered income for you.
Alimony and Child Support
On a federal level, alimony and child support are not considered taxable income and are excluded from taxes.
Foreign Earned Income Exclusion
If you are a U.S. citizen but live and work in another country, you are required to file your taxes in the United States but could use the foreign earned income exclusion of up to $120,000 to alleviate a hefty dual tax bill.
Municipal Bond Interest
If you have any municipal bonds, the interest you receive from them is excluded from taxes. However, this does not apply to U.S. treasury or other bonds.
Some Scholarships and Grants
Some scholarships and educational grants are excluded from income if they are used for tuition and supplies and not for meals or lodging.
Confused about which income you can exclude from your taxes? Our tax preparers have answers for you. Call us today.
**Please keep in mind: Tax laws, eligibility requirements, and rates change often, and these lists are not exhaustive. Always contact a tax preparer for the most up-to-date information.