What Does the IRS Consider Taxable Income?

taxes with andy magnus

Andy Magnus, a CPA and ex-IRS Agent, explains the differences between income that is taxable or non-taxable in the eyes of the IRS.

The general rule in the Internal Revenue Code defines all income as money received from any source derived, or for which you receive value.

However, there are circumstances where income is not taxable.

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What the IRS considers taxable income

  • Wages and Salaries
  • Interest and Dividends
  • Capital gains
  • Taxable Refunds
  • Certain IRA distributions
  • Pensions
  • Annuities
  • Alimony
  • Rental income
  • Business income
  • Forgiveness of debt

What is not considered income

  • Gifts
  • Proceeds from garage sales, eBay, CraigsList
  • Inheritances
  • Life insurance proceeds

The “It Depends” List

  • Certain IRA distributions
  • Social Security depending on other income sources
  • Proceeds from the sale of items

Example: I buy a piece of artwork at a garage sale for $2 and sell it at auction for $1,000,000 (pinky at corner of mouth) then the proceeds are reported as a capital gain.

 

Andy Magnus Tax Expert

Disclaimer: This information is general in nature and may not apply to your specific situation.  Because the tax law is written in words, there may be more than one interpretation of any given set of facts.  Contact a qualified tax professional before taking any action.

To contact Andy Mangus for your specific tax situation, contact him via his website: www.ProActiveTaxPros.com

 

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