Taxes are almost everywhere, but there might be some ways to get some income while you do not have to pay them. Most things you buy or invest in are subject to tax payments. Non-taxable items or income are very rare. Luckily, there are some credits that allow you to collect them without having to pay anything at all. Apart from that, there might be payouts and settlements that you could get and they are also free from taxes.
Remember that even if something is nontaxable it may have to be in your tax return according to the Internal Revenue Service. Some people with disability may receive other payments that are not taxable. Of course, these payments will have to be related to your disability. Take for example those payments you may get because of blindness. These benefits must come from public welfare funds though. Besides, if you get a compensatory payment for damages do not pay taxes either. It could be for both physical sickness o injury.
Are workers’ compensations for an occupational injury or sickness payments free from taxes?
They may be free from taxes. As long as they are payments under a worker’s compensation act, they are non-taxable. Or if it is under a law that is similar to the aforementioned act. In addition to this, there will be no taxes either for disability benefits under a “no-fault” insurance policy from your car. Although, it must be for loss of income capacity as a consequence of the injuries you had. Another tax-free payment is the compensation for permanent loss. It could also be compensation for disfigurement that is permanent. IRS also includes the loss of a function or part of your body.
Moving on to a completely different field, gifts may also be non-taxable. However, to avoid taxes its value cannot exceed the limits the IRS sets. In 2023, taxpayers can receive a gift without paying taxes as long as it does not exceed the value of $17,000 per person. The giver will be the person that has to pay taxes, not the person that receives the present.
What about alimony? Is it taxable or not?
It will depend on your state and it may be taxable. According to the IRS, certain alimony can allow the payer spouse to benefit from deductions while the spouse that gets alimony must put it in income. Bear in mind that there were changes in 2019 and you may not be able to deduct payments. Moreover, child support payments are also tax-free. What’s more, Roth IRA withdrawals are free from taxes. Obviously, these withdrawals must be when it is possible. If they are not “qualifying” you will have to pay taxes. Having this retirement savings account for at least five years is essential.
Your age also matters, do not withdraw money before turning 59 and six months. Another tax-free possibility is your income. Income tax may not apply in some states. Those who qualify for adoption reimbursements will not have to pay taxes either. Those American citizens that suffer the consequences of a disaster may get mitigation payments. After surviving a disaster, what you do not need are more expenses, and luckily, you will not pay anything for this mitigation money.