Surprisingly Taxable Income
Believe it or not, there are types of income that taxpayers may or may not know is taxable. If you are not sure whether or not your income is taxable, prepare and efile your tax return on eFile.com. We will generate the correct tax forms based on your answers to some easy questions, and we will enter any taxable income with accurate calculations. Start for free now by clicking the blue button below:
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If you want to learn more about income and received payments that are taxed, read on below.
Taxable Income and Received Payments
- Jury Duty Fees: If you served on a jury, the federal or state government pays you for your civic duty. Since your pay is from the government, it must be reported on a tax return. Otherwise, the IRS may send you a notice asking about the missing jury duty income. Your employer may or may not continue paying you while serving jury duty, so you may want to ask him or her about this. If he or she requests that you give them your jury pay, you may claim your pay as a deduction on Schedule C, line 30.
- Gambling Winnings: If you win big at a casino or a lottery, do not be surprised if you end up not keeping all of your gambling winnings. The IRS usually taxes those winnings at a flat 25% rate rather than at your income tax withholding rate. Since casinos, race tracks, and other places of gambling are heavily regulated by the IRS, they are required to report your winnings on Form W-2G.
- Unemployment Benefits: Any unemployment benefits from the federal or state government, including disability benefits is generally taxable. The government will send you a Form 1099-G showing the total amount they paid you.
- Bartering Services and Goods: If you exchange your services or goods with others, you may be taxed on them even if it is not money. The person you traded with should send you a Form 1099-B reporting the fair market value of the goods or services. In addition, both of you have to report the information on separate Schedule C's: you report the value of your services while the other person reports the amount. Though you may have to pay estimated taxes on trades, you can deduct the costs for performing the services you bartered.
- Bed & Breakfast and Other Rental Home Services: For any bed & breakfast or other rental home services, you need to pay taxes on any income you earned if the rental lasts more than 15 days.
- Lawsuit Settlements: If you win a lawsuit, you may need to pay taxes on your settlement based on the damages you have suffered.
- Benefits and Bonuses from Employers: Benefits and bonuses are considered supplemental wages taxed at a flat 28% rate. Be aware that you also have to pay state and local taxes on it, as well as Social Security and Medicare. If your employer paid for an online course or other educational service, you can exclude up to $5,250 of the expenses. Since your employer does not report the benefits with your wages and other compensation, you do not need to report the benefits on your tax return. You will need to pay tax on any expenses over $5,250, which your employer will report on your W-2.
- Life Insurance: Based on your policy, your life insurance may be taxed if you take the cash value of your policy, your policy was arranged without insurable interest based on your state's law, your employer owns the policy, and you gift the policy to a third party (spouse excluded).
- Buried Treasure: If you found buried money or sold an antique table you saw in a deserted area, you must report that income to the IRS. This rule has been in place since 1954 when a couple earning $4,467 for selling a used piano they purchased for $15 had to pay taxes on it; a U.S. District Court agreed to the IRS requirement.
- Stolen Property: The IRS will not let you off the hook for any income you earned from illegal activities (robbing a bank, drug dealing, etc). They also tax any bribes. If you are caught for not reporting your income, they can also charge you for tax evasion.
- Received Alimony: Alimony payments received must be reported as income on your tax return if your divorce or separation agreement was finalized in 2018 or any prior year. It is not the same as child support, which is non-taxable.
- Fantasy Sport Winnings: Any money you win from fantasy sport leagues (including private ones) is considered taxable gambling income. You should receive a Form 1099-MISC reporting at least $600 of winnings from any fantasy sports website. If you have any losses such as entry fees in leagues you did not win, you can deduct the losses against your gains if they happened within the same year.
- Forgiven Loans: Any forgiven loans you have received from the federal government or a private company must be reported as income on your tax return. You do not have to report any loans from relatives or friends since they are considered gifts.
- Payments Earned for Donating Eggs to Infertile Couples: If you received money for donating your eggs to a fertility clinic, the IRS will tax that payment. You should receive a 1099 form from the clinic that sent you the payment.
- Nobel Peace Prize Money: The IRS requires you to pay taxes on any money you received for winning the Nobel Peace Prize or Pulitzer Prize, unless you donate the payment to a tax-exempt charity before receiving it. However, if you accept the money and give it to charity, you may have to pay taxes on some of the income since you can only deduct up to 50% of your adjusted gross income for charitable purposes.
- Gifts from Employer: If you received a non-monetary gift from an employer rewarding you for the work you have done for a company, you may be taxed on that gift.
More Taxable Income Information