Checklist for Items of Income

The determination of whether an item of income is includible in income and, thus, taxable, or whether it is excludable from income is crucial to the determination of tax liability. An item that is includible increases tax liability, depending on the amount, whereas an excludable item decreases tax liability. The following chart, which is arranged alphabetically by income item, indicates whether the item is includible or excludable from income.

Income Item

• Accident and health insurance premiums, employer-paid (except for long-term care benefits provided through flexible spending accounts and subject to limitation as to medical savings accounts)…..NO

• Accident and health plans proceeds (under insurance purchased by taxpayer or under employee supported plans) where premiums did not give taxpayer a previous medical expense deduction…..NO

• Agreement not to compete, payments received for…..YES

• Airline deregulation benefits, special rule, unemployment compensation…..YES

• Alimony, support and separate maintenance payments, receipt of …..YES

• Allowances received by dependents of members of the Armed Forces …..NO

• Annuities (amounts in excess of cost) …..YES

• Annuities, interest on advance premiums…..YES

• Antitrust action, punitive damages recovered…..YES

• Armed Forces pay (except "combat zone" or "missing" status pay) …..YES

• Athletic facilities on employer’s premises, value of use…..NO

• Awards, generally…..YES

• Back pay…..YES

• Bad debts, prior taxes and interest on taxes, recovery of, no tax benefit in prior year…..NO

• Bargain purchases from employer to extent discount exceeds gross profit percentage…..YES

• Barter income…..YES

• Beauty contest winners, receipt of scholarships and amounts for personal appearances…..YES

• Bequests and devises…..NO

• Bonds, state, city, etc., interest on …..NO

• Bonuses…..YES

• Buried treasure…..YES

top

Business interruption insurance proceeds:

• based on income experience…..YES

• based on per diem idleness…..NO

• Business profits…..YES

• Business subsidies for construction or contributions by customer or potential customer…..YES

• Capital contributions to corporation…..NO

• Car pool receipts by car owner for transportation of other employees…..NO

• Car used for business purposes by full-time car salesperson, value of use…..NO

• Checks, uncashed by payee, for previously deducted items…..YES

• Child or dependent care plan benefits, employer-subsidized, limited…..NO

• Child support payments…..NO

• Christmas bonuses from employer, based on percentage of salary (aside from hams, turkeys, etc., given for goodwill) …..YES

• Civil Rights Act violation, back pay recovery…..YES

• Clergy fees and contributions received unless earned as agent of religious order…..YES

• "Combat zone" pay, military…..NO

• Commissions…..YES

• Commodity credit loans, receipt of (optional) …..YES

• Compensation, property received, value of …..YES

• Contract cancellation, payments received for …..YES

• back pay…..YES

• loss of anticipatory benefits (business) …..YES

• personal physical injuries or sickness …..NO

• slander or libel of personal reputation (damages received after August 20, 1996) …..YES

• Death benefits, employer-paid (employees dying after August 20, 1996) …..YES

• Debts, cancellation of, generally…..YES

• Defamation damage award, compensating injury to business and professional reputation (damages received after August 20, 1996) …..YES

• Dependent care assistance program payments, limited…..NO

• Disability payments, other than for loss of wages, all taxpayers, including veterans…..NO

• Disability pensions, Veterans’ Administration…..NO

• Disaster unemployment payments…..YES

• Discharge of indebtedness…..YES

• Dividends, stock distributed in lieu of money…..YES

• Drawing account, excess cancelled by employer…..YES

• Educational assistance, employer-provided under a nondiscriminatory plan, for courses beginning before June 1, 2000 (assistance relating to graduate studies is includible for courses beginning after June 30, 1996)…..NO

• Embezzlement proceeds…..YES

• Employee discount, qualified…..NO

• Employment contract, amounts received by employee for cancellation…..YES

• Endowment policies, generally as to non-annuity payments until cost is recovered…..NO

• Farm income…..YES

• Farmers, government payments to offset operating losses or lack of profits…..YES

• Fellowships and scholarships, degree programs…..NO

• Financial counseling fees, employer-paid…..YES

• Foreign earned income, limited…..NO

• Foster parents, reimbursements for care of a qualified foster child…..NO

• Fringe benefits, if no additional cost service, qualified employee discount, working condition fringe, de minimis fringe …..NO

• Future services, prepayment of …..YES

• replacement residence purchased within 2 years before or after sale, pre-May 7, 1997, sales and exchanges…..NO

• up to $125,000, taxpayer age 55 and over, pre-May 7, 1997, sales and exchanges…..NO

• up to $250,000 ($500,000 for joint filers), post-May 6, 1997, sales and exchanges…..NO

• condemnation of nonresidential property except where award is used for replacement…..YES

• discount on later sale or redemption of bonds purchased with excess number of interest coupons detached…..YES

• obligations purchased or satisfied for less than face value…..YES

• partner’s sale of asset to partnership…..YES

• sales of depreciable property…..YES

• sales of goodwill…..YES

• sales of patents…..YES

• sales of property…..YES

• sales of stock in foreign corporations…..YES

• sales of stock of foreign investment company…..YES

• swap-fund transfers…..YES

• Gambling winnings…..YES

• Gifts…..NO

• Government employees, additional compensation as inducement to accept foreign service employment…..YES

• Health insurance proceeds, not paid by the insured’s employer or financed by the insured’s employer through contributions that were not included in the employee’s gross income…..NO

• Hedging transactions, commodity futures transactions…..YES

• Hobby income…..YES

• Illegal transactions, gains from: gambling, betting, lotteries, illegal businesses, embezzlement, protection money, etc. …..YES

• Illness, employee’s compensation during, except to extent qualifying as insurance benefits…..YES

• Incentive stock options…..NO

top

Income tax refunds:

• federal…..NO

• state, to extent of tax benefit from prior deduction…..YES

• Inheritances…..NO

• Insider’s profits…..YES

top

Insurance proceeds:

• business interruption insurance, based on lost income…..YES

• use or occupancy, actual loss of net profits…..YES

• excess of de minimis amount, deemed interest…..YES

• within de minimis amount…..NO

Interest on:

• bank deposits or accounts…..YES

• bonds, debentures, or notes…..YES

• claim awarded by judgment …..YES

• condemnation awards…..YES

• deferred legacies…..YES

• federal obligations…..YES

• insurance contracts…..YES

• refund of federal taxes…..YES

• short-term commercial paper…..YES

• Involuntary conversions, gain from, if reinvested…..NO

• Juror’s mileage allowance…..NO

• Jury fees…..YES

Layoff pay benefits:

• supplemental unemployment benefit plan, company-financed…..YES

• Lease cancellation, payments received for…..YES

• Leased retail space, cash or rent reductions received for construction or improvements (post-August 5, 1997, leases) …..NO

• Legal services plan, employer contributions and value of benefits received…..YES

• Lessee’s improvements, value of to lessor upon termination of lease…..NO

• Libel or slander of personal reputation, exemplary damages…..YES

• Life insurance dividends, veterans’ converted, interest on…..NO

• Life insurance, group-term premiums paid by employer, to extent of employer’s cost of $50,000 or less of insurance…..NO

• Life insurance proceeds, paid on death of the insured…..NO

• Living expenses paid by insurance while damaged home being repaired…..NO

• Living quarters and meals, unless furnished on employer’s premises for employer’s convenience…..YES

• Lodging, cost of, furnished on employer’s premises for employer’s convenience…..NO

• Losses, previously deducted, reimbursement for or expense items…..YES

• Meals, cost of, furnished on employer’s premises for its convenience…..NO

• Medical care reimbursements, employer-financed accident and health plan…..NO

• Mileage allowance…..YES

• Military personnel, basic pay…..YES

• Military service, employer-payments to employees…..YES

• Mortgage indebtedness, prepayment at a discount to the extent of the discount…..YES

• Moving expenses, qualified, employer-reimbursement (under qualified fringe benefit rules) …..NO

• Mustering-out pay, military personnel…..YES

• National Labor Relations Board, back-pay award…..YES

• National Service Life Insurance dividends…..NO

• Nobel prize and similar awards if transferred by recipient to qualified entity…..NO

• Obligations, federal interest on…..YES

• Old age, disability, survivors’ benefit payments, Social Security or Railroad Retirement Acts, below base amount…..NO

• Parsonage, rental value of, furnished to a minister or rabbi as part of compensation; rental allowances if used to rent or provide a home…..NO

• Partnership, distributive share of taxable income…..YES

• Patents, sale to controlled foreign corporation…..YES

• Peace Corps volunteers, basic living and travel allowances…..NO

Pensions:

• annuities, etc., for personal injuries or sickness resulting from active service in armed forces of any country, National Oceanic and Atmospheric Administration, or U.S. Public Health Service…..NO

• distributions attributable to employer contributions…..YES

• Personal physical injuries, damages…..NO

• Political campaign contributions, with exceptions…..NO

• Prizes…..YES

• Professional fees…..YES

• Pulitzer prize and similar awards if transferred by recipient to qualified entitY…..NO

• Punitive damages…..YES

• Purchases, nondiscriminatory employee-discounts…..NO

• Railroad Retirement Act benefits, partial exclusion…..NO

• Rebates, credits, price reductions received by customers…..NO

• Rent reductions received by retail tenants for construction or improvements (post-August 5, 1997, leases)…..NO

• Rents…..YES

• Retirement pay attributable to employer contributions other than veterans’ disability retirement pay…..YES

• Reward, informer’s …..YES

• Royalties…..YES

• Salaries, including those of state and federal employees and amounts employer withholds for income, Social Security, and Railroad Retirement taxes…..YES

• Scholarships and fellowships, degree programs…..NO

• Security deposits, when retained by lessor…..YES

• employer’s plan, subject to limitations…..NO

• workers’ compensation equivalent…..NO

• Social Security old age, disability and survivor’s benefits, partial exclusion…..NO

• State contracts, profits on…..YES

• Stock distributions in general…..NO

• Stock options incentive…..NO

• Strike benefits, union and non-union employees in need, paid in form of food, clothes, etc. …..NO

• Supper money, employer-paid, occasional due to overtime work…..NO

• Supplemental security income (SSI) paymentS…..NO

• Support payment, received from former spouse…..YES

• Surviving spouse, decedent’s salary continued, limited…..NO

• Survivor annuities, paid to family of public safety officer…..NO

top

Taxes:

• employees’, employer-paid…..YES

• refunds of, not previously deducted or deducted without tax benefit…..NO

• Tenancy, payments for surrender of…..YES

• Tips…..YES

• Treasure trove…..YES

• Treaty-exempt income…..NO

• Tuition, employer-paid under qualified plans for classes beginning before June 1, 2000 (but not for graduate-level courses beginning after June 30, 1996) …..NO

• Unemployment benefit plans, supplemental payments…..YES

• Unemployment benefits…..YES

• U.S. Savings Bonds, earned increase during year, if cash-method taxpayer elects…..YES

• Use and occupancy insurance proceeds, income experience…..YES

• Vacation fund allowance, union agreement…..YES

• Veterans Administration payments…..NO

• Veterans’ benefits…..NO

• Veterans’ bonuses, state…..NO

• Wages…..YES

• Workers’ Compensation Acts, payments under…..NO

• "Wrap-around" annuity contracts sold by life insurance companies, interest on…..YES

top

Note to users: All information provided is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the facts of the particular situation.