A few surprising things that can be taxable!

Social Security:   According to the IRS No one pays federal income tax on more than 85 percent of his or her Social Security benefits based on Internal Revenue Service (IRS) rules

    If you:                          

•   file a federal tax return as an "individual" and your combined income* is
  • between $25,000 and $34,000, you may have to pay income tax on up to 50 percent of your benefits.
  • more than $34,000, up to 85 percent of your benefits may be taxable.
• file a joint return, and you and your spouse have a combined income* that is
  • between $32,000 and $44,000, you may have to pay income tax on up to 50 percent of your benefits
  • more than $44,000, up to 85 percent of your benefits may be taxable.
• are married and file a separate tax return, benefits are usually taxable.

Unemployment:  Unemployment income is 100 percent taxable, it’s usually a good idea to have taxes deducted as you receive it, rather than paying a lump sum when you file your tax return.

Alimony:  If you receive alimony checks from your ex-spouse, they’re taxable. It can be a good idea to make Estimated Tax Payments throughout the year so you’re not surprised by a large tax bill when you file your return. However not all checks are taxable, the divorce decree must specially categorize the payments as “alimony.” Alimony payments are also tax deductible for the payor.  Child support payments and property payments are tax-free and not deductible.

Gambling:  If you hit it big Atlantic City, Las Vegas or the race track and receive a W2-G then your winnings are taxable although they can be offset by your gaming losses up to the amount of your winnings. It’s a good idea to have proof of the losses, usually a statement from the casino or receipts from the track.

Scholarships/Grants.   Scholarship money if it’s going to a student at an accredited school and covers tuition, books, fees, or school supplies is not taxable. Although it is taxable if it used for housing or transportation expenses. Grant money is tax free. If you receive a 1099-MISC form from an employer on any income over $600 you must declare it as part of your overall income.

Gifts of Money: Monetary gifts you receive $14,000 and under in 2013 (or over $28,000 if the gift is from a married couple) are not taxable. This gift tax has been around for quite a while although the amounts have slowly increased over time. Monetary gifts in excess of $14,000 are taxable unless it is paid directly to an educational institution, then the entire amount is not taxable.

1099-Misc: If you receive this form from an employer on income $600 or more then yes it’s taxable and you’ll most likely have to pay a self employment tax.

This material is not intended to provide legal, tax or investment advice. Clients should contact their own tax advisors to learn more about the rules that may affect their individual situations.