What is my non-taxable income?

For a year, you can receive income from a variety of sources. The Internal Revenue Service of the United States (IRS) defines income as “any form of money, property or services” that a taxpayer receives during a fiscal period.

Although we can take it for granted, the IRS alludes that any amount recognized as income is subject to tax unless it is “specifically exempted by law.” These exemptions by law correspond to non-taxable income or non-taxable income.

According to the IRS, taxable income or taxable income must be reported on your return and subject to tax. The income is not taxable in turn, “they may have to be shown in the declaration” but are not subject to tax.

It is of great interest that we recognize those concepts that by law are considered non-taxable income. Let’s make a presentation of some of them.

Disability or life insurance benefits

If you buy disability insurance from your net income, any benefit you receive from it will be tax-free, even if it is supplementary insurance.

If you are the victim of an accident where an injury occurs that results in temporary or permanent disability, the benefit or collection received as compensation is not taxable.

Compensation for an injury or traumatology that occurs for work reasons is also a non-taxable income. The same applies for any benefit you receive for disability from a public institution.

If a family member dies and leaves a life insurance coverage, in the vast majority of cases they represent income exempt from taxes.

Payments for guardianship of minors

In the case of divorced parents, the money received for child support is a non-taxable income.

Any benefits received from the government for the “foster care” of children placed in adoptive homes under the schemes for the purpose designed, is free of tax.

If you have intentions of adopting a child on your own initiative and your employer has the benefit of adoption assistance according to Nerdwallet.com adoption assistance provided by employers is free of taxes up to USD 13,570 per child for 2017.

Fitness programs covered by the employer

If the company for which you work has physical conditioning facilities, such as a gym or sports club of your own, the benefits that you receive your family group are exempt from tax on your part.

This condition does not apply to programs paid by employers in centres or facilities that are not owned by them.

Yields for municipal bonds

When you buy a municipal bond, you lend money to a state or local government. That government entity must make regular interest payments.

The vast majority of municipal bond revenue payments are classified as non-taxable revenues at the federal level. If you buy government bonds from entities in your own state, you will not have to pay state income tax on interest payments, which means that municipal bonds are often exempt from all types of income taxes.

Christmas gifts and minimum benefits

According to the publication 525 updates 2017 of the Internal Revenue Service, if your employer has the tradition of giving gifts on holidays such as Thanksgiving turkey or a Christmas ham, that gift is a non-taxable income.

It is a very different gift of a good to a monetary prize, coupon or instrument easily redeemable to cash, these will be subject to tax.

When your employer is accustomed to frequently giving away products or services whose value is considered “unrepresentative” such as a weekly breakfast toast, or a piece of cake in the afternoons, this “minimum benefits” will not count as taxable income.

Benefits for academic training

If you receive any subsidy for university expenses, the money that covers tuition is generally non-taxable . However, you have to pay taxes on the money that is used to cover subsistence expenses even if the taxable and non-taxable income comes from the same source or subsidy.

Only discount the amount you used for your non-taxable expenses of your taxable income. We talked practically of the payment of the tuition and the rent for studies.

According to the IRS ( Pub. 970 ), you can deduct from your income up to a maximum of USD 5,250 for assistance for academic training covered by the company for which you work.

Eventual provision of services for the transfer of persons

An efficient way to generate extra income is charging for the eventual transfer of passengers. That is, why not charge your coworkers or neighbours to help with fuel costs and car maintenance?

This will be a non-taxable income provided that it does not represent your main source of income and you charge less than the formal rates.

The inheritances

Inheritances are governed by the estate tax or inheritance tax in the US. It establishes minimum amounts of tax exemptions that change annually. For example, in 2017 if you collected an inheritance for the equivalent of USD 5.49 million or less, it is considered as non-taxable income.

Higher amounts will be paid estate tax for the amount exceeding the exempt minimum.

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