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Is it taxable?

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Is it taxable? Is it taxable?

Getting together with family and friends this holiday season? Why not play 'Is it taxable?' Ideally played with a charming host, flashing lights, curtains and lots of great prizes, 'Is it taxable?' can also be played just by asking the question, then giving the answer. This makes it handy for playing in the car or while waiting for lunch to be served. Answers are given right after the questions, because you spend enough time in December hunting for odd recipe ingredients, light timers and that gift you bought your dad sometime this summer.

Important instructions: before you begin, remind people that taxable means income which needs to be included on a tax return. Also the income amount shouldn't matter, so long as it's over 50 cents. I like to think of each of the examples as being $10,000, but if you prefer another number, go ahead.

OK, ready? Let's go 'Is it Taxable?' 

 Wage income?

 Yes, it's taxable!  (OK, that was easy.)

A big check from your grandmother? 

Wow, be sure to write a nice thank-you note. This is not taxable income for the recipient, no matter its size. There is a gift tax which may be assessed to the giver on gifts over $14,000 per year per recipient, but that's a whole different topic.

The money you found on the street?

Yes; if you keep the money, it is taxable.

Hardship funds from your retirement account?

If you took a loan from your retirement account and are current on payments, that is not a taxable event. However, if you withdrew the money it is. This must be reported on your income tax form, even if taxes were withheld at the time of withdrawal. 

Heating assistance?

Not taxable.

Scholarships?

Maybe. It depends on whether you are a degree candidate and whether the funds are used to pay for your tuition and books or room and board.

Disability or retirement social security?

Again, maybe, there is a worksheet which needs to be completed to determine how much of the social security income is taxable.  If you receive social security income and file taxes, it's important to have that information available.

One week rental of your home?

If you rent out your primary residence for less than 15 days a year, the rental income is not taxable. It's just an odd loophole.

For more questions (the expansion pack), check with the IRS. One source is, Publication 17, Your Federal Income Tax, Chapter 12, Other Income.  

Remember, this quiz just looks at whether income needs to be reported on tax returns. Whether or not income results in tax liability depends on total income, filing status, adjustments, deductions, exemptions, credits and penalties is a far more complicated 'game,' which will begin in early January.

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