There are anenormous number of side gigsthat could help you earn a little extra cash each month.
Come tax season, however, things can get confusing especially if youve earned income from multiple sources.
You might find yourself wondering which income is actually taxable.
AP Photo
As it turns out, the IRS has pretty much thought of everything.
We chatted with tax experts to tackle this complex question and ease some of the confusion.
We then compiled this list of obvious and not-so-obvious taxable income sources you should know about.
Maybe youre scrambling after your car broke down.
Or you got a medical bill you werent expecting.
Or inflation has finally pushed your budget over the edge.
You dont need to go it alone.
When money is tight,these resourcescan help you manage unexpected expenses without stress.
What Does the IRS Actually Consider Taxable Income?
Here are the things you must report to the IRS as taxable income.
Your Salary
This one is the pop in of income most people are familiar with.
If you get a steady paycheck from an employer, you better report this income to the IRS.
Your salary also includes bonuses and commissions.
Bonusesor cash awards given to employees generally must be included in your income as wages.
This includes cash tips.
All income must be reported, even if its not deposited into the bank.
Freelancers are responsible for paying regular income tax and a self-employment tax.
The self-employment tax is currently 15.3%.
Twelve point four percent of that is for Social Security and 2.9% is for Medicare.
Worldwide Income
Lets say you live in the United States but earn income from a company based overseas.
Worldwide Income must be reported to the IRS by filling out Form 2555.
This rule says the first $126,500 of your income is not taxable by the U.S. government.
However, your income will likely be taxable by the country youre living in.
And if you breach the $126,500 limit, Uncle Sam will start taking his share, too.
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Bartering
Bartering doesnt typically feel like money in your pocket.
One example of taxable bartering would be a plumber exchanging plumbing services for the dental services of a dentist.
Gambling Winnings
Gambling winnings are fully taxable, and you must report them on your tax return.
Gambling income includes but isnt limited to winnings from lotteries, raffles, horse races and casinos.
And, yes, yourwinnings from sports betting apps are taxable, too.
Theoretically, you could deduct your gambling losses, which might help offset some of the pain.
But for use this strategy, youd have to take an itemized deduction.
Since the passage of theTCJAin 2017, most people are better off taking the standard deduction.
Unfortunately, taking the standard deduction effectively removes the ability to deduct your gambling losses.
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The same applies to items that you sell or flip online.
The primary distinction between a business and a hobby isintent in this case, intent to make a profit.
In either case, though, you oughta report your earnings.
Youre just protecting yourself from committing yet another crime when you report this income.
Regardless of the circumstances, income from illegal activity must be reported.
There are even separate sections about stolen property and kickbacks you should probably report these, too.
This form of bribery is one the IRS says must be included in your tax income.
Stolen Property
No joke!
If youre having regrets, though, there is a way out.
Canceled Debts
If creditors forgive some or all of your debt, the IRS considers this income.
it’s possible for you to view the full list of exceptions (its a long one!)
on the IRS website.
Debt forgiveness is a complex topic we highly recommend discussing your specific situation with a tax expert.
Prizes and Awards
Prizes and awards are also considered taxable income by the IRS.
This also extends to prestigious awards won from accomplishments such as a Pulitzer, Nobel, or similar prizes.
There is, however, a list of requirements that would exclude you from needing to report this income.
You brew coffee at home, you dont walk into Target and you refuse to order avocado toast.
(Can you sense my millennial sarcasm there?)
Heres where things start to get interesting.
There are also dozens of things the IRS doesnotneed you to report as income.
Again, its a long list, so be sure to checkbefore filing your taxes.
Olympic Medals and Other Winnings
Olympicand Paralympic medals come with associated prize money.
In the past, athletes were subject to a federal victory tax on their winnings, but no longer.
Child Support
Divorce has confusing tax implications.
Fortunately, one thing is clear: child support is not considered taxable income.
This is good news because raising kids is expensive every penny helps.
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4.
The IRS considers these payments reimbursement for your expenses.
This also includes European insurance payouts made as a result of World War II.
There is an exception.
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She is a regular contributor to The Penny Hoarder.
Reporting by contributors Dave Schafer and Caroline Gaspich and former contributor Sarah Kuta is included in this story.
