In: Accounting
Exclusions from gross income: U.S. Federal income tax law :-
The courts have given very broad meaning to the phrase "all income from whatever source derived," interpreting it to include all income unless a specific exclusion applies. Certain types of income are specifically excluded from gross income. These may be referred to as exempt income, exclusions, or tax exemptions. Among the more common excluded items are the following:
Tax exempt interest. For Federal income tax, interest on state
and municipal bonds is excluded from gross income.Some states
provide an exemption from state income tax for certain bond
interest.
Some Social Security benefits. The amount exempt has varied by
year. The exemption is phased out for individuals with gross income
above certain amounts.
Gifts and inheritances. However, a "gift" from an employer to an
employee is considered compensation, and is generally included in
gross income.
Life insurance proceeds received by reason of the death of the
insured person.
Certain compensation for personal physical injury or physical
sickness, including:
Amounts received under worker’s compensation acts for personal
physical injuries or physical sickness,
Amounts received as damages (other than punitive damages) in a suit
or settlement for personal physical injuries or physical
sickness,
Amounts received through insurance for personal physical injuries
or physical sickness, and
Amounts received as a pension, annuity, or similar allowance for
personal physical injuries or physical sickness resulting from
active service in the armed forces.
Scholarships. Amounts in the nature of compensation, such as for
teaching, are included in gross income.
Certain employee benefits. Non-taxable benefits include group
health insurance, group life insurance for policies up to $50,000,
and certain fringe benefits, including those under a flexible
spending or cafeteria plan.
Certain elective deferrals of salary (contributions to "401(k)"
plans).
Meals and lodging provided to employees on employer premises for
the convenience of the employer.
Foreign earned income exclusion for U.S. citizens or residents for
income earned outside the U.S. when the individual met qualifying
tests.
Income from discharge of indebtedness for insolvent taxpayers or in
certain other cases.
Contributions to capital received by a corporation.
Gain up to $250,000 ($500,000 on a married joint tax return) on the
sale of a personal residence.[39]
There are numerous other specific exclusions. Restrictions and
specific definitions apply.
Some state rules provide for different inclusions and exclusions.
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