It’s no surprise that your wages, the money you may make from side gigs, any tips you receive, and funds you earn from investments must be reported as income on your tax return. What might be surprising is that the IRS expects you to report gambling winnings, the value of things you barter, and even debt cancellation as income. Here are 5 things you might not think of as taxable income.
1. Social Security benefits
Since you pay into Social Security throughout your working life, you might expect the benefits to be tax free when you’re finally eligible to receive them. That’s the case if your retirement income is $25,000 or less per year if you’re a single taxpayer, or if it’s $32,000 or less annually if you're married filing jointly. Above those levels, however, up to 85% of your Social Security benefits may be subject to income taxes. You can arrange to withhold funds for tax purposes or you can make quarterly estimated income tax payments to cover your tax obligation.
2. Gaming winnings
When you hit the jackpot, you might not be the only one celebrating. The federal government has arranged to share in the good news by requiring casinos, betting parlors, racetracks and other gaming establishments to report winnings over $600 to the IRS. A number of rules apply to different kinds of wagers, but if your winnings qualify for taxation, the gaming venue will send you a Form 1099, reminding you of your good fortune. Should you itemize your income tax deductions, you may be able to deduct your gaming losses up to (but not beyond) the amount of your winnings. You’ll need to keep records of your losses with losing gaming receipts to prove you don’t always win big.
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3. High-value awards
If your employer rewards your great work with a valuable prize—cold, hard cash or some other item of value—you may owe tax on the award. Even a service may be taxable under IRS rules. For example, if you receive a two-year car lease for achieving a corporate goal or outperforming your peers, you’re required to report the lease’s value on your tax return.
4. Cancellation of debt
Reaching a settlement to pay less than the full amount owed on a credit card or toward other debt can help you get back on your financial feet, but it can cost you at tax time. The IRS usually views cancelled debt due to a default or settlement as a type of income. Your lender will mail you a Form 1099 for the amount of money you did not pay back so you can include it when calculating your taxable income.
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5. Exchanging goods or services
If you manage to trade something you own for something of value—an expensive watch for a car repair, a tree trimming, or even a demolition job—you may be justly proud of the deal you struck. However, part of that exchange—the difference between the value of the item you gave and the value of the service you received—may be taxable. Likewise, if you’re paid for work you’ve done with something other than cash, that barter arrangement must also comply with IRS regulations and be reported as income on your taxes.
These are just some of the things you might not think of as taxable but actually are. To learn about other things you won't believe are taxable, visit TurboTax.com.