Questions & Answers

What types of income are NOT taxable?

Don't overpay the IRS by including nontaxable income on your tax return.

The following income is generally NOT taxable income. There are always exceptions. For example, inheritances are generally not taxable, but if you inherited an IRA account, you will be taxed when you receive IRA distributions. But for most people, these types of income are NOT taxable:

  • Life insurance proceeds
  • IRA and Pension rollovers
  • Child support payments
  • Inheritances
  • Gifts
  • Workers Compensation
  • Disability payments if you paid the premiums on the policy. If your employer paid the policy, then the disability payments are taxable. If you paid part of the policy, then part of the disability payments you paid are nontaxable.
  • Court damages or settlements for personal physical injuries or physical sickness. Punitive payments are taxable.
  • Health and accident benefits
  • Federal income tax refund
  • State income tax refund (if you took the standard deduction last year)
  • Most scholarships, fellowships, and Pell grants
  • Foster care payments (certain restrictions for individuals over age 18 in foster care)
  • Gain on the sale of your personal residence is usually nontaxable. The gain might be taxable if you lived in the residence less than two years or if the residence has ever been used as a rental property or home office
  • Roth IRA qualified distributions
  • Welfare payments
  • Supplemental Security Income (SSI)
  • Social security benefits (including SSDI) are either nontaxable or partially taxable. Enter your social security benefits on the Social Security Benefits screen and we'll calculate how much, if any, of your benefits are taxable
  • Cancellation of debt because of bankruptcy or insolvency. Enter your 1099-C or 1099-A on the Canceled Debt screen and we'll calculate how much, if any, of the canceled debt is taxable
  • Veterans Administration disability benefits
  • Pay-for-Performance Success Payments that reduce the principal balance of your home mortgage under the Home Affordable Modification Program
  • Black lung benefits
  • Cash rebates. For example, if you receive a cash rebate of $100 after you purchase a new washing machine
  • Insurance proceeds for theft or damage to your property
  • Utility rebates
  • Long-term care insurance benefits
  • Military allowances
  • Peace Corps living allowances
  • Reimbursement for medical care
  • Certain individual care provider income
  • Disaster relief payments

If you have taxable income, you can click the Where Do I Enter? link on the side bar to find out where to enter it.

What income is taxable?

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