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What Income Is Not Taxable

Many taxpayers assume the IRS taxes any and every form of income. While most types of income are taxable, some are not. Here’s a look at some forms of income that are generally not subject to federal income tax:

  • Child support payments
  • Gifts, bequests, and most inheritances
  • Compensatory damage awards for physical injury or sickness
  • Cash rebates from a dealer or manufacturer
  • Reimbursements for qualified adoption expenses
  • Life insurance proceeds received because of the insured person’s death
  • Qualified scholarships used for certain costs (e.g., tuition)
  • Veterans benefits
  • Employer contributions to health savings accounts
  • Dependent care assistance
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