Nontaxable income is income that is exempt from tax. Most nontaxable income is not reported. Some types of nontaxable income will be shown on the return, but will not be added into the amount of income subject to tax.The following types of income are nontaxable:
* Child support
* Federal income tax refunds
* Certain life insurance proceeds
* Gifts and bequests
* Inheritances
* Insurance and certain other payments for physical injury and sickness
* The first $2,400 of Unemployment Compensation
* The 65% subsidy for payment of COBRA health care coverage continuation premiums is not taxable for federal income tax purposes
Although gifts and bequests may be exempt from federal income taxes, they may be subject to state and local taxes. Inheritances are usually not taxable except for IRAs and Pensions.
The following types of income are also exempt from taxes:
* Interest on certain Series EE and Series I savings bonds redeemed to pay for qualified higher education expenses
* Interest on certain state and local obligations (municipal bonds)
* Most life insurance proceeds paid upon death
Other nontaxable forms of income include:
* Public assistance payments (certain TANF payments)
* Certain railroad retirement benefits (part may be exempt)
* Social security benefits (part may be exempt)
* Department of Veterans Affairs (VA) disability benefits
* Workers’ compensation
* Accident and health insurance benefits for personal injuries or sickness
* Qualified scholarships and fellowships
* Certain dependent care services provided by employer
* Certain employer-provided educational benefits (up to $5,250)
* Interest on insurance dividends left with VA
* Employer-provided assistance for qualifying adoption expenses
* Restitution payments and excludable interest received by Holocaust victims, their estates, or their heirs
* Certain long-term care benefits
The Temporary Assistance for Needy Families program (TANF) replaced the Aid to Families with Dependent Children program (AFDC).
Certain accelerated death benefits or payments received under a life insurance contract on the life of a terminally or chronically ill individual, before the individual’s death, may also be nontaxable income.
A taxpayer who receives Copy C of Form 1099-LTC is not the policyholder. He is the insured. The form is for information only and should be disregarded because none of the benefits are taxable to the recipient of the Copy C.
* Federal income tax refunds
* Certain life insurance proceeds
* Gifts and bequests
* Inheritances
* Insurance and certain other payments for physical injury and sickness
* The first $2,400 of Unemployment Compensation
* The 65% subsidy for payment of COBRA health care coverage continuation premiums is not taxable for federal income tax purposes
* Interest on certain state and local obligations (municipal bonds)
* Most life insurance proceeds paid upon death
* Certain railroad retirement benefits (part may be exempt)
* Social security benefits (part may be exempt)
* Department of Veterans Affairs (VA) disability benefits
* Workers’ compensation
* Accident and health insurance benefits for personal injuries or sickness
* Qualified scholarships and fellowships
* Certain dependent care services provided by employer
* Certain employer-provided educational benefits (up to $5,250)
* Interest on insurance dividends left with VA
* Employer-provided assistance for qualifying adoption expenses
* Restitution payments and excludable interest received by Holocaust victims, their estates, or their heirs
* Certain long-term care benefits