Income the IRS Can't Touch

Wouldn't it be nice to have a source of nontaxable income? You may be more fortunate than you realize. Here are several types of income that the IRS does not tax.


1. Tax-free interest. The federal government does not tax municipal bond interest. This includes bonds issued by a state or municipality. The tax-free benefit increases the higher your income, but caution must be taken to ensure the underlying municipality is not in dire financial condition.

​2. Health insurance premiums. Most health insurance premiums are tax free (for now). This could change in the future to help pay for health care reform, but for most people this benefit can currently be paid using pre-tax dollars.

3. Income from Roth IRA and Roth 401(k) accounts. While the amounts contributed into these retirement savings accounts are taxed, any earnings made on the contributions are tax free for federal income tax purposes as long as holding period and distribution rules are followed.

4. Health savings accounts (HSA). Contributions are deductible while earnings are tax free as long as disbursements from the account are used to pay for qualified health care expenses.

5. Child support received. Child support income you receive is free from federal tax.

6. Car pool revenue. While commuting expenses are not generally deductible, any reimbursement of your commuting expenses by fellow passengers is not reportable as income.

7. Home sale gains. Up to $250,000 ($500,000 for married filing jointly) of capital gains on a sale of your principal residence can be tax free.

8. Up to 14 days of rental income. If you rent out your home or vacation property, up to 14 days of this rental income each year can be tax free.

9. Certain employer compensation. In addition to health care premiums, there are a number of employee benefits that are not taxable. All have limits, but every tax-free dollar is money in your pocket. These include:

• Airline miles earned on business credit card expenses
• Certain employee-provided tuition expenses
• Qualified adoption expense reimbursement
• Up to $50,000 in employer-paid term life insurance
• Flexible spending accounts for dependent care and health care
• Commuting expense benefits for parking and mass transit commuting

Remember, when you pay for something in pre-tax dollars, it's like giving yourself a raise. Take advantage of as many tax-free income opportunities as possible.

​"Tax Tips" are published to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office.
 
The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.
 
We are trusted CPA advisors servicing Burr Ridge, Hinsdale, Willowbrook, Darien, Naperville, and all Chicagoland area. 

Do you need assistance with your business and/or personal tax returns? Would you like to have a trusted source for your accounting, allowing you additional time to focus on increasing your business? Do you use QuickBooks, or plan to in the future, for your accounting? We include these in all our service packages, customized to fit your personal or business needs.   
 
We are currently accepting new clients. Your initial consultation is free, so you have nothing to lose and everything to gain. Our experienced staff is available to help you streamline your accounting, giving you more free time for yourself. Set up an appointment today by calling (630) 320-3720 or email us at info@monarchaccountinggroup.com. 
 
For more free resources, such as Tax Rates, Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com.

Monarch Accounting Group, Inc
145 Tower Drive, Suite 4
Burr Ridge, IL 60527
Phone (630) 320-3720

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