Today I will explain what is considered a taxable income. Many people are uncertain whether some types of income are taxable or not.
According to IRS:
Generally, an amount included in your income is taxable unless it is specifically exempted by law.
To put it simply: taxable income is every penny of income you have received in the past year. You can receive income in the form of money, property, or services.
Most people are aware that they must include wages, salaries, interest, dividends, tips and commissions as income on their tax returns.
However, many don’t know that they must also report other types of income.
Here are some examples:
- Self-Employment Income – All income earned through the taxpayer’s business, as an independent contractor is self-employment income and is fully taxable. Some people are mistaken that if the income is under $600 per customer it is not taxable.
- Childcare providers and babysitters – If you provide child care, either in the child’s home or in your home or other place of business, the pay you receive must be included in your income. Additionally, fees received for jobs such as housecleaning and lawn cutting are taxable
- Bartering – Bartering is an exchange of property or services. You must include in your income, at the time received, the fair market value of services you receive. For example if you are a hairdresser and provide your services in exchange for some accounting counseling done by a CPA, you must report the FMV of services received.
- Prizes and awards – the cash value of prizes or awards. Also, the fair market value of products won as a prize or award is also taxable.
- Gambling winnings – are fully, and definitely taxable. It includes: winnings from lotteries, casinos, horse races, etc. You may have to pay an estimated tax on the gambling winnings.