Sources of Non-taxable Income

Although the IRS does want a share of most income, here are a few sources of income that are not taxed.


Alimony – Alimony received from a divorce that occurred after December 31, 2018 is not taxable.  (It’s also not deductible by the payor.)


Child Support – Child support is never taxable to the recipient.


Gifts – Did grandma, mom, or a friend give you a cash gift?  Congratulations, it’s not taxable.


Municipal Bond Interest – This interest is not taxed by the IRS.  If you live in the same state as the municipality issuing the bond, it is generally exempt from tax on your state return as well.


Inheritance – An inheritance is never taxable by the IRS to the recipient.  However, there are a handful of states that do tax it.


Life Insurance – Life insurance proceeds received as a beneficiary are generally not taxable.  Be careful if you are cashing in your life insurance policy though, a portion will be subject to tax.  Any interest received on the life insurance is also taxable.


Disability Benefits – If you receive disability payments from a policy for which you paid 100% of the premiums, those payments are not taxable. If both employee and employer pay the premiums, then payments would be partially taxable.


Honorine Campisi, CPA