Wednesday, October 8, 2008

What Is Considered Nontaxable Income ?

Believe it or not, some types of income you receive are not taxable. Be careful when you add up your gross income to determine whether you have a filing requirement that you do not include any non-taxable income.

- Some types of income that are not taxable include:
-Child support payments,
-Welfare benefits,
-Life insurance proceeds received because of the death of an individual,
-Interest on certain state or local government obligations,
-Accident and health insurance proceeds, including certain long term care insurance contracts,
-Certain property received as a gift or inheritance,
-Benefits received under any law administered by the Department of Veteran's Affairs,
-Amounts received under a worker's compensation act for an occupational sickness or injury,
-Qualified distributions from Coverdell Education Savings Accounts (formerly called Education IRAs); refer to Individual Retirement Arrangements (IRAs) for more information,
-Certain Roth IRA distributions; refer to Roth IRA Distributions for more information,
-Certain amounts withdrawn from Medical Savings Accounts (MSA's) to pay medical expenses, and
-Limited amounts of dependent care assistance paid through a dependent care assistance program.
-Death gratuity benefits paid to survivors of deceased armed forces members for deaths occurring after September 10, 2001.
-Homeowners assistance program payments, subject to certain limits, paid after November 11, 2003, by the Department of Defense.

For tax years after 2002, Dependent Care Assistance Program paid by the military for military personnel.

All or a part of your Social Security or Railroad Retirement Benefits may be nontaxable.
Some scholarship and fellowship grants may be non-taxable.

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