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Financial Planning Insights

Taxable vs. Non-Taxable Income

By Chandler and Knowles | | 0

No one wants to pay more income tax than they should.  With good tax advice from a reputable firm like Chandler & Knowles CPA Firm, you can feel confident that you will be not making mistakes and overpaying. The tax laws change from year to year and you can count on our experience to keep up with the times.   

The Main Differences Between Taxable and Non-Taxable Income

taxable income, nontaxable income Taxable income is that income for which you owe tax taxes to the federal government. For earnings you will usually receive a W-2 or 1099 listing what your earnings are and if taxes have been withheld from them. How much tax is withheld is determined by the choices you made on the W-4 that you fill out for each employer.

Non-taxable income is money that you receive for which you are not required to pay tax to the federal government.

This sounds pretty straight forward but the reality is that it is quite complicated. Income is more than just money, it can be property or services. Income you earn from an employer, including wages, salaries, tips, fees, commissions, fringe benefits and stock options are all taxable. Fringe benefits like a company car for your personal use or other perks you receive are also taxable as are income from interest, dividends and stock sales.

What are some examples of income?

Not all income is from employment. If you are divorced and your divorce was settled before December 31, 2018, you must report the money you receive as taxable income. If however, you receive child support, it is non-taxable.

Social Security for some people is non-taxable and for others is partially taxable depending on the amount of other income that you have. If you receive an employer-sponsored pension it is fully taxable. Minimum Required Distribution from IRS accounts begins at age 70 ½ and any part that was not previously taxed, is now taxable.

Capital gains on the sale of your primary residence are not taxable on the first $250,000 for a single filer and $500,000 for a couple who file jointly (some restrictions apply). You must have lived in the home for two of the five years prior to the sale.

Contact The Team at Chandler & Knowles

When it comes to taxable vs non-taxable income, it can get pretty complicated. With the knowledgeable staff at Chandler & Knowles CPA Firm on your side, you can have peace of mind knowing that you won’t be paying more income tax than you should. Check out our tax planning services to keep you prepared for next year’s tax season. We serve nationwide.

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About Chandler & Knowles CPAs:

Chandler & Knowles CPAs is dedicated to serving our clients with an integrated approach to financial success for businesses, families and individuals. Our knowledgable team is committed to providing you with the most detailed information to answer your biggest financial questions and to help make your life less taxing.

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