When it comes to paying taxes, many people presume the IRS gets a piece of the pie no matter the circumstances. Though most accept defeat and pay the required amount to the government, there are quite a few circumstances most people do not realize where the IRS has no entitlement to specific incomes. With this in mind, we at Mark Dicus & Company would like to discuss the fortunate sources of nontaxable income that the IRS does not tax.
Income the IRS Can’t Touch
Carpool Revenue. Any reimbursement of your commuting expenses by fellow passengers is not reportable as income though commuting expenses are not generally deductible.
Child Support Received. Child support income is federal tax-free, unlike any alimony received.
Health Insurance Premiums. At this present time, health insurance premiums are tax-free. For now, this benefit can be paid in pre-tax dollars though this is scheduled to change in the future to help pay for health care reform.
Health Related Spending Accounts (HSA). As long as the proceeds in the account are used to pay for qualified health care expenses, contributions and earnings in these health-related spending accounts are tax-free.
Home Sale Gains. Potentially being tax-free, up to $250,000, or $500,000 for married filing jointly, of capital gains on a sale of your principal residence
Income from Roth IRA and Roth 401(k) Accounts. Any earnings made on these contributions is federal tax-free as long as holding period and distribution rules are followed while the amounts contributed to these retirement savings accounts is taxed.
Tax-Free Interest. Being federal tax-free, is the municipal bond interest, which includes the bonds issued by a state or municipality. Though caution must be taken to ensure the underlying municipality is not in dire financial condition, the tax-free benefit increases the higher your income is.
Specific Employer Compensation. There are a number of employee benefits that are not taxable, in addition to health care premiums. Every tax-free dollar is money in your pocket although there are some limitations. These examples include the following:
– In employer paid term life insurance, up to $50,000
– Expense reimbursement for qualified adoptions.
– For dependent care and health care, flex spending accounts.
– Commuting expense benefits for parking and mass transit commuting.
– Certain employee provided tuition expenses.
– On business credit card expenses on the airline miles earned.
Accountants, Bookkeepers, Tax Specialists & More in Salt Lake City, St. George, West Valley City, Provo, Orem, West Jordan & Greater Cedar City, Utah
Keep in mind that any time you can pay for something in pre-tax dollars, it is like giving yourself a raise. Be sure to take advantage of all your federal tax-free income opportunities. To help you find these tax breaks, be sure to contact Mark Dicus & Company and let our certified experts assist you. Our team of tax professionals are current with all of today’s tax laws and know where to save you money. Our team of professionals possess the expertise you can rely on to ensure your taxes are done accurately and thoroughly. Call our friendly office today, we offer tax services, bookkeeping services, accounting services, and provide consultation services for you and/or your business.