8 unexpected things that are taxed in the USA
Everyone knows that wages are taxed by the federal government, but Uncle Sam has a far-reaching definition of “taxable income,” writes Money Talk.
It covers numerous types of earnings. Many people do not even imagine that they are subject to federal income tax.
Below are a few types of taxable income that may come as a surprise.
1. Pension benefits of social security
Typically, people pay federal income taxes on their benefits if they have other significant incomes, such as salaries, interest, or dividends.
If social security benefits are your only source of retirement income or you have little income in addition to your benefits, your benefits probably will not be subject to federal income taxes.
2. Dividends of Alaska Permanent Fund
When in 2019, Anchorage, Alaska, was named one of the best places in the country for retirement, the Alaska Permanent Fund was mentioned.
“Yes, maybe it's cold here, and yes, it can be expensive. But if you live for a year, you can get an annual dividend from the Alaska Permanent Fund, supported by oil revenues. In 2018, the fund paid $ 1600 per person. However, this is not the only reason to move to Anchorage. ”
But dividends for adults, sometimes for children, are subject to federal income taxes, notes Alaska Revenue Department.
The state agency warns: if you do not disclose the dividends of the Alaska Permanent Fund in your federal tax return, you may be fined for negligence or subject to other sanctions.
For pre-nuptial contracts concluded before 2019, child support is usually deductible by the payer and the recipient should indicate them as (taxable) income.
This has changed for contracts concluded or changed after December 31, 2018. According to the federal tax reform law of 2017 , such alimony payers cannot deduct payments, that is, now they actually pay taxes on this money, and alimony recipients do not consider payments as income.
The IRS expects people to report bribe income in their tax returns.
On the subject: 4 legal tax loopholes to save thousands of dollars in 2020
“If you get a bribe, include it in your income,” the federal agency said.
5. Forgiven arrears
If you're lucky enough to convince someone to write off your debt in 2019, you probably felt relieved. The problem is that you cannot be completely off the hook.
Generally, if a debt is forgiven, if it is not intended as a gift, the IRS expects you to consider the canceled amount as income when filing federal taxes.
6. Illegal activities
It is expected that even criminals will report their income, including income from illegal activities (for example, from the sale of illegal drugs).
7. Gambling wins
The euphoria that you experience when you win in gambling can quickly fade away when you realize that the IRS expects you to pay taxes on your unexpected income.
And the matter is not only what is happening in the casino. Lottery and casino winnings should also be reported to the IRS as revenue.
However, you can use the gambling losses that you incurred in the same year that you won to offset your tax burden.
You cannot avoid paying taxes by accepting goods or services instead of cash for your work. Therefore, you must include in your income the fair market value of these goods or services.
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