What is Non Taxable Income?

Definition of non taxable income

Non taxable income is the income that is exempt from federal tax. There are also state and local non taxable income. However, unless specified, non taxable income are assumed to be federal income non taxable. That means the IRS does not get to tax you on the amounts of non taxable income even if the amounts are reported on your tax return.

Some types of non taxable income will be shown on the tax return because they are used to calculate amounts of tax deductions, tax credits, tax exempt qualifications. However, non taxable income will not be included in taxable income subject to tax.

Examples of non taxable income Child support payments Life insurance proceeds Welfare benefits and public assistance (such as certain TANF or temporary assistance for needy families payments) Worker's Compensation Veterans' benefits Gifts, bequests, and inheritances Accident and health insurance proceeds Supplemental security income or SSI Federal income tax refunds Interest on state or local government obligations (municipal bonds) Military allowances Moving expense reimbursements Compensatory damages awarded for physical injury or sickness