• June 6, 2016
  • admin
  • 0

In the first of our two-part series we discussed the various types of taxable income. To take the conversation further, we will explore some of the most common nontaxable income types. It is  important to remember that all income is taxable, unless the law categorically specifies it as an exception. Let’s take a look at what  income types qualify for exemption.

Nontaxable Income Types

S Corporation Income

An S Corporation is a closely held entity that is exempt from income tax deductions. The income or losses that S Corporations get are passed on to the shareholders, who in turn report the same.   Although the income is taxed at the shareholder level, S corporations must file returns on the Form 1120S to declare the corporation’s results for the particular tax year.


There are several types of gifts that are nontaxable. If taxes are applicable, the donors are responsible for paying them, not by the receivers. Under special arrangements, recipients may agree to pay the tax. Some of  non-taxable gifts are:

  • Gifts that do not exceed the annual exclusion limit for a particular calendar year.
  • Gifts to a spouse
  • Gifts to any political party
  • Tuition or medical expenses you carry for somebody

It is worth mentioning here that annual exclusion applies to gifts to each individual recipient. For example, if you give a monetary gift to each of your children worth a specific amount on or after January 1, the annual exclusion is applicable to each gift. The annual exclusion for 2014-2016 is  $14,000.

Employer-Provided Insurance

The IRS states that the health care benefits that the employer provides to their employees is not a part of the employee’s income, and therefore, it is not taxable. The coverage can either be in the form of a health insurance that the employer provides through a third party or a part of health reimbursement arrangements. In addition to employer-provided long-term insurance, the deposits made into the health savings account are also nontaxable.

Life Insurance

The life insurance proceeds that a beneficiary receives upon the death of an insured person is usually not taxable. If the insurer however, redeems the policy for cash the amount that exceeds the cost of the policy is subject to tax.

Last Few Words

Tax related matters are often complicated, and therefore, it is advisable to seek the help of a professional if you are unsure about the taxability of any of your incomes.  A tax professional will not only help you save money by filing your taxes correctly, but also save you from any penalties you may have to face in case of an incorrect or negligent tax filing.  Should you wish to learn more or have any questions please feel free to contact us for a no-obligation consultation.

Please follow and like us:

What Our Clients Have to Say

Susan WilsonSusan Wilson
03:27 25 Jan 23
I have been very pleased with the solid counsel and guidance that Nick Nemeth has provided me regarding my tax issue. I found him to be honest and straightforward which I appreciated. I was impressed with his relevant experience and knowledge . He has definitely brought me peace of mind during a difficult and stressful time.
Sarah HowardSarah Howard
03:44 14 Nov 22
I would like to thank Mr. Nick and his staff for the superb help that I received from them. My IRS problem was resolved quickly and efficiently. It took 2 visits to convince me that I was over my head. I thought that I could call the IRS, appeal my tax notices and settle on a payment plan on my own. After many phone calls to the IRS, waiting sometimes more than 4 hours with no resolution to speak of, it proved to be extremely difficult and stressful. Revisiting Mr. Nick was a huge wake up call. My account was reviewed, and a payment plan was established with the IRS within a week. I will be forever grateful to the staff who worked on my case and especially to Lorna who listened to me vent while going through this painful process.
00:33 07 Aug 22
I cannot say enough good things about Nick and his team. When I first met with Nick he was up front, honest, friendly and efficient. When I worked with one of his attorneys, Eric B, I was just as pleased. All of the staff there are nice and very helpful. I wish I hadn't waited so long to get help with my issue. Over 6yrs I tried getting through and getting anywhere with the IRS and hardly made any progress. I know this may not be the case for all, and even I thought it would take longer than it did, but 3mos and they had my situation straightened out. I still can't believe it. Thank you thank you THANK YOU for all that you did for me. This is a huge burden gone out of my life now thanks to you. If anyone needs help out there, I know you may not want to shell out more money to get their help but it may just save you in the long run.
Spoilly GirlSpoilly Girl
23:49 03 Aug 22
The Nemeth Law team is exceptional. They treat their clients like a family member who is in crisis. They want you to get the best possible outcome. I really appreciate everything that they did for me. Jake and Ashley had the greatest role in my case and it all turned out for the best for me. Thank you Nick and team for easing my fears and getting me through the long process. I'm truly grateful.
Eddie WaltEddie Walt
19:44 12 Jul 22
During a time in which competent, professional service at a fair price seems to have disappeared, Mr. Nemeth and his team are a refreshing breath of fresh air.From my first phone call to the final settlement of our case with a non-responsive IRS, they under-promised, over-delivered and were in constant courteous contact to make sure we knew exactly what was happening and where we stood.I hope to never need their services again, but, should I receive another friendly letter from the IRS...I know who to call!
Quick Inquiry


    Enter the text you see above