There are actually a surprising number of different types of income that cannot be taxed by the Internal Revenue Service.  Nontaxable income is the income that a person receives that does not need to be reported to the IRS.  Some people may not know what income is and is not taxable when it comes to the IRS, so it can be very beneficial for people to learn since this will save them time and possibly money when it comes to filing their taxes.  It is still important to keep records of this income, especially if a person is audited.  They will need to show proof that their income is legitimate and nontaxable and this is typically not very difficult to do.  All an individual needs to do is prove that the income that falls under one of the categories listed below, or under the category of a similar nontaxable item, and the IRS can do nothing to get at that money.

Some of the most popular types of income that can not be taxed include child support payments and welfare benefits that an individual or family may be entitled to.  However, what many people may not know is that there are a number of other options that a person has for income that is nontaxable.  These include but are not limited to income that is received by an individual due to the death of another person, proceeds from accident insurance or health insurance companies, and this also goes on to include insurance contracts for individuals who are in need of long term care, as well as some specific pieces of property that an individual may have received as a gift from another person or as an inheritance from a person who has either given them the possession while they were still alive or as an inheritance from a person in a last will and testament. 

The IRS also considers any money that is received by an individual under the Department of Veteran’s Affairs nontaxable, and this includes any benefits from the Department.  Worker’s compensations packages that a person man have received due to an injury or a long standing sickness that occurred while the person was on site at their job would also be nontaxable.  Certain Education IRAs and Roth IRA allotments to individuals are also not to be taxed by the IRS, but it is important to look into those divisions for the specifics when it comes to what instances require taxes to be paid on them and which instances do not require to have taxes paid.  This is also true for certain situations in which money is withdrawn from a Medical Savings Account in order to be used to pay for medical care and other medical expenses.  Some dependent care assistance programs will also allow a certain percentage of what is paid through their program to be nontaxable.

After September 10, 2001, all survivors to those who where in the armed forces that were deceased after this date do not have to pay any taxes on their death gratuity benefits.  And for all tax years and seasons after the year 2002, dependent care paid by military Dependent Care Assistance Programs was nontaxable for military members.  These are just some of the ways in which individuals can save money, since there are nontaxable income items.  People do not need to include this income on their tax filings for years that coincide with any of these events happening to them.  This works out nicely for the individuals since they will be able to keep all of the allotments and not have to worry about giving any of the money to the government in the form of taxes.

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