These 12 Things Are Taxed, Even If You Don’t Think They Are

Steve Cummings

Taxes can be complicated, and it can be challenging to know what exactly is considered taxable income. While most people are aware that wages and salaries are subject to taxes, several other sources of income may need to be clarified.

Many types of income can be taxed, from fringe benefits to rental income. In this blog post, we'll discuss 12 things that are taxed, even if you don't think they are.

Understanding these sources of taxable income can help you avoid surprises come tax season and ensure that you are properly reporting your income to the IRS.

1. Certain Large Gifts

Big Gifts
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While giving gifts is usually a heartwarming gesture, if you're considering giving a significant gift to someone, be aware that it might be subject to taxes.

In the United States, the gift tax applies to gifts exceeding the annual exclusion amount, currently $15,000 per recipient per year. Any amount above this limit may be taxable, and you must file a gift tax return.

2. Gambling Winnings

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Gambling winnings, such as lottery prizes, casino jackpots, or sports betting earnings, are considered taxable income by tax authorities. When filing your tax return, you must report these winnings to ensure compliance with tax laws.

Being aware of this tax obligation helps prevent any surprises during tax season. Additionally, it's crucial to maintain records of your gambling activities, including wins and losses, to provide accurate information when reporting your taxable income.

3. Alimony Payments

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If you finalized your divorce before 2019, alimony payments made to a former spouse are considered taxable income for the recipient and tax-deductible for the payer.

However, for divorces finalized after December 31, 2018, alimony payments are no longer deductible for the payer and are tax-free for the recipient.

4. Scholarships and Grants

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While many scholarships and grants are tax-free, they can sometimes become taxable. If the funds are used for expenses other than tuition, fees, and required books or supplies, they may be taxable.

Understanding the tax implications of scholarships and grants is essential to avoid unexpected tax liabilities when filing your tax return.

5. Unemployment Benefits

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Unemployment benefits provide financial assistance to those who have lost their jobs and are considered taxable income. When filing your tax return, you must report these benefits to comply with tax laws.

To avoid a large tax bill at the end of the year, it's advisable to make estimated tax payments throughout the year based on the amount of unemployment benefits received.

6. Canceled Debt

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When a lender forgives or cancels the debt you owe, it is referred to as canceled debt. While this may initially appear as a financial relief, it's essential to know that canceled debt is often considered taxable income.

As a result, you need to report it on your tax return to remain compliant with tax laws. Understanding this tax implication can help you avoid unexpected liabilities and ensure you are prepared for any potential tax consequences during tax season.

7. Prizes and Awards

Prizes and awards
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If you win prizes or awards, they are usually taxed. This includes cash prizes, trips, and gifts. Sometimes, the organization giving the prize or award will withhold taxes before giving it to you.

Other times, you may need to report it on your tax return and pay taxes yourself. Remember that even if you don't receive a physical prize or award, if you earn money through a competition or contest, that is also taxable income.

8. Fringe Benefits

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Fringe benefits are extra perks or benefits that you receive from your employer, such as a company car, gym membership, or health insurance.

These benefits are usually considered taxable income and must be reported on your tax return. However, some fringe benefits, such as specific educational assistance programs, may be tax-free.

9. Social Security Benefits

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Social Security benefits are payments made to retired or disabled workers, their spouses, and children – these benefits are usually not taxed if they are the only income you receive.

However, if you have other sources of income, such as wages or investment income, then a portion of your Social Security benefits may be subject to taxation.

10. Rental Income

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Rental income is the money you earn from renting out a property you own. This income is generally taxable, but there may be deductions and credits that can reduce your tax liability.

You will also need to report any expenses related to renting the property, such as repairs, maintenance, and advertising costs. You don't need to report the income if you rent out a property for less than 15 days per year.

11. Bataring

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Bartering is exchanging goods or services without using money – for example, if you are a carpenter and exchange your services for a plumber's services, that is considered bartering.

The value of the goods or services exchanged is still considered taxable income, even though no money changes hands.

You must report the fair market value of the goods or services on your tax return. Remember that certain types of bartering, such as trading personal items with a friend, may not be subject to taxation.

12. Selling Gametes

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Selling gametes, such as sperm or eggs, for reproductive purposes can be a way to earn extra income. However, this income is generally considered taxable.

If you sell your gametes through a clinic or agency, they may withhold taxes before paying you. If you sell your gametes privately, you must report the income on your tax return.

It is crucial to keep accurate records of any expenses related to the sale, such as medical or travel costs. Additionally, selling gametes may have legal and ethical considerations, so it is essential to do your research before pursuing this option.

Know What is Taxable

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Paying taxes is both our duty and responsibility as citizens. Knowing the different types of income subject to taxation can help ensure you stay compliant with tax laws and avoid any unexpected liabilities during tax season. So make sure to keep accurate records and file your taxes on time. Remember, it is better to be aware of the different types of income subject to taxation than to be mindful of unexpected tax liabilities or penalties.

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