Taxable and Nontaxable Income

Taxable Income is any income that is subject to tax. It must be reported on a tax return, unless the amount is so small that you are not required to file a return. The following types of income are taxable:

Wages, salaries, bonuses, and commissions
Tips and other compensation for personal services
Interest/Dividends (unless tax-exempt)
Alimony received or separate maintenance payments received
Recoveries of items deducted in prior year(s)
Business income
Hobby income (a hobby loss is not deductible)
Capital gains
Gain from the sale of property
Pensions and annuities (part may be nontaxable)
IRA distributions (part or all may be nontaxable)
Rents received
Royalties
Estate, trust or K-1 income
Unemployment compensation
Railroad retirement benefits (part may be taxable)
Social security benefits (part may be taxable)
Jury duty pay
Executors' fees
Gambling winnings (including lotteries, contests, raffles, etc.)
Non qualifying scholarships and fellowships
Payments for punitive damages and compensatory damages not attributable to physical injuries or sickness.
Bartering income
Some cancelled debts
Foster care payments
Military pensions

Nontaxable Income is income that is exempt from tax. If a return must be filed, some types of nontaxable income will be shown on your return but will not be added into the amount of income subject to tax. The following types of income are nontaxable:

Child support
Gifts, bequests and inheritances (may be subject to other taxes)
Life insurance proceeds
Certain veteran’s benefits
Buildup of cash or loan value of life insurance
Insurance reimbursement of medical expenses not previously deducted
Most life insurance proceeds paid upon death
Public assistance payments
Workers' compensation
Dividends on veteran’s life insurance loans
Compensatory damages for personal physical injury or physical illness
Supplemental Security Income (SSI) payments
Some qualified pension distributions for Public Safety Officers