Test: Understanding your awareness on nontaxed earnings?
In the latest edition of Kiplinger's Personal Finance, readers will find a tax quiz that promises to be a breeze, given the wealth of tax stories covered in the publication. This is a testament to the comprehensive and informative nature of the articles, which delve into various aspects of personal finance and taxes.
The article sheds light on a lesser-known yet significant topic: states that do not tax pension income. However, the main focus is on the types of income that are not taxed by the IRS. These include financial gifts, charitable gifts, certain employer-provided benefits, distributions from a Health Savings Account (HSA), distributions from a Roth retirement account, certain portions of annuity income, and life insurance proceeds.
Financial gifts, such as amounts given up to the annual federal gift tax exclusion, are generally not taxed for the recipients. Charitable gifts made to legitimate charities are also typically nontaxable. Certain employer-provided benefits, like employer-paid health insurance, up to $50,000 of group term life insurance provided by an employer, and employer contributions to a Health Savings Account (HSA), are nontaxable. Distributions from a Health Savings Account (HSA) are tax-free when used for qualified medical expenses. Life insurance proceeds, such as payouts from life insurance settlements, are generally not subject to federal income tax. Inheritance can be received tax-free at the federal level, especially from spouses, though some states impose inheritance tax. Withdrawals from a Roth retirement account can be tax-free under certain conditions, typically after age 59½. Certain portions of annuity income may be nontaxable, as illustrated where a monthly annuity income includes a nontaxable portion.
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To help readers prepare for the tax quiz and refresh their memory on the topics discussed, links are provided below the quiz.
In addition, a new 'No Tax on Tips' bill has been approved, which is another interesting development in the tax world.
Subscribing to Kiplinger's e-newsletters can help individuals become smarter and better informed investors, making them more equipped to navigate the complex world of finance and taxes.
ICOs, being a form of personal finance, are not directly addressed in this text.
When making financial decisions, it's advantageous to be aware of the types of income that are not taxed by the IRS, such as financial gifts, charitable gifts, certain employer-provided benefits, distributions from a Health Savings Account (HSA), distributions from a Roth retirement account, certain portions of annuity income, and life insurance proceeds.
