Publication 17
taxmap/pub17/p17-073.htm#en_us_publink1000172062The following brief discussions are arranged in alphabetical
order. Income items that are discussed in greater detail in another publication
include a reference to that publication.
taxmap/pub17/p17-073.htm#en_us_publink1000172063You must include on your return income from an activity from
which you do not expect to make a profit. An example of this type of activity is
a hobby or a farm you operate mostly for recreation and pleasure. Enter this
income on Form 1040, line 21. Deductions for expenses related to the activity
are limited. They cannot total more than the income you report and can be taken
only if you itemize deductions on Schedule A (Form 1040). See
Not-for-Profit Activities
in chapter 1 of Publication 535 for information on whether an
activity is considered carried on for a profit.
taxmap/pub17/p17-073.htm#en_us_publink1000172064If you received a payment from Alaska's mineral income fund (Alaska
Permanent Fund dividend), report it as income on line 21 of Form 1040, line 13
of Form 1040A, or line 3 of Form 1040EZ. The state of Alaska sends each
recipient a document that shows the amount of the payment with the check. The
amount also is reported to IRS.
taxmap/pub17/p17-073.htm#en_us_publink1000172065Include in your income on Form 1040, line 11, any alimony payments
you receive. Amounts you receive for child support are not income to you.
Alimony and child support payments are discussed in chapter 18.
taxmap/pub17/p17-073.htm#en_us_publink1000172066If you receive a bribe, include it in your income.
taxmap/pub17/p17-073.htm#en_us_publink1000172067These contributions are not income to a candidate unless they
are diverted to his or her personal use. To be exempt from tax, the
contributions must be spent for campaign purposes or kept in a fund for use in
future campaigns. However, interest earned on bank deposits, dividends received
on contributed securities, and net gains realized on sales of contributed
securities are taxable and must be reported on Form 1120-POL, U.S. Income Tax
Return for Certain Political Organizations. Excess campaign funds transferred to
an office account must be included in the officeholder's income on Form 1040,
line 21, in the year transferred.
taxmap/pub17/p17-073.htm#en_us_publink1000236661Do not include in your income amounts you receive from the passengers
for driving a car in a car pool to and from work. These amounts are considered
reimbursement for your expenses. However, this rule does not apply if you have
developed car pool arrangements into a profit-making business of transporting
workers for hire.
taxmap/pub17/p17-073.htm#en_us_publink1000172068A cash rebate you receive from a dealer or manufacturer of an
item you buy is not income, but you must reduce your basis by the amount of the
rebate.
taxmap/pub17/p17-073.htm#en_us_publink1000172069You buy a new car for $24,000 cash and receive a $2,000 rebate
check from the manufacturer. The $2,000 is not income to you. Your basis in the
car is $22,000. This is the basis on which you figure gain or loss if you sell
the car and depreciation if you use it for business.
taxmap/pub17/p17-073.htm#en_us_publink1000172070You generally should not report these reimbursements on your
return unless you are figuring gain or loss from the casualty or theft. See
chapter 25, for more information.
You should not report these payments on your return. See
chapter 18 for more information.
To determine if settlement amounts you receive by compromise
or judgment must be included in your income, you must consider the item that the
settlement replaces. The character of the income as ordinary income or capital
gain depends on the nature of the underlying claim. Include the following as
ordinary income.
- Interest on any award.
- Compensation for lost wages or lost profits in most cases.
- Punitive damages, in most cases. It does not matter if they
relate to a physical injury or physical sickness.
- Amounts received in settlement of pension rights (if you did
not contribute to the plan).
- Damages for:
- Patent or copyright infringement,
- Breach of contract, or
- Interference with business operations.
- Back pay and damages for emotional distress received to satisfy
a claim under Title VII of the Civil Rights Act of 1964.
- Attorney fees and costs (including contingent fees) where
the underlying recovery is included in gross income.
Do not include in your income compensatory damages for personal
physical injury or physical sickness (whether received in a lump sum or
installments).
taxmap/pub17/p17-073.htm#en_us_publink1000172073Emotional distress itself is not a physical injury or physical
sickness, but damages you receive for emotional distress due to a physical
injury or sickness are treated as received for the physical injury or sickness.
Do not include them in your income.
If the emotional distress is due to a personal injury that is
not due to a physical injury or sickness (for example, employment discrimination
or injury to reputation), you must include the damages in your income, except
for any damages you receive for medical care due to that emotional distress.
Emotional distress includes physical symptoms that result from emotional
distress, such as headaches, insomnia, and stomach disorders.
taxmap/pub17/p17-073.htm#en_us_publink1000172074You may be able to deduct attorney fees and court costs paid
to recover a judgment or settlement for a claim of unlawful discrimination under
various provisions of federal, state, and local law listed in Internal Revenue
Code section 62(e), a claim against the United States government, or a claim
under section 1862(b)(3)(A) of the Social Security Act. For more information,
see Publication 525.
taxmap/pub17/p17-073.htm#en_us_publink1000172075Generally, if you receive benefits under a credit card disability
or unemployment insurance plan, the benefits are taxable to you. These plans
make the minimum monthly payment on your credit card account if you cannot make
the payment due to injury, illness, disability, or unemployment. Report on Form
1040, line 21, the amount of benefits you received during the year that is more
than the amount of the premiums you paid during the year.
taxmap/pub17/p17-073.htm#en_us_publink1000172076If you purchase a home and receive assistance from a nonprofit
corporation to make the down payment, that assistance is not included in your
income. If the corporation qualifies as a tax-exempt charitable organization,
the assistance is treated as a gift and is included in your basis of the house.
If the corporation does not qualify, the assistance is treated as a rebate or
reduction of the purchase price and is not included in your basis.
taxmap/pub17/p17-073.htm#en_us_publink1000173555If you received an economic recovery payment, such as the payments
of $250 made to certain recipients of social security, SSI, railroad retirement,
or certain veterans' benefits, it is not taxable for federal income tax
purposes, but it reduces any making work pay credit.
taxmap/pub17/p17-073.htm#en_us_publink1000172077If you get a job through an employment agency, and the fee is
paid by your employer, the fee is not includible in your income if you are not
liable for it. However, if you pay it and your employer reimburses you for it,
it is includible in your income.
taxmap/pub17/p17-073.htm#en_us_publink1000172078You can exclude from gross income any subsidy provided, either
directly or indirectly, by public utilities for the purchase or installation of
an energy conservation measure for a dwelling unit.
taxmap/pub17/p17-073.htm#en_us_publink1000172079This includes installations or modifications that are primarily
designed to reduce consumption of electricity or natural gas, or improve the
management of energy demand.
taxmap/pub17/p17-073.htm#en_us_publink1000172080This includes a house, apartment, condominium, mobile home, boat,
or similar property. If a building or structure contains both dwelling and other
units, any subsidy must be properly allocated.
taxmap/pub17/p17-073.htm#en_us_publink1000172081
An estate or trust, unlike a partnership, may have to pay federal income tax. If
you are a beneficiary of an estate or trust, you may be taxed on your share of
its income distributed or required to be distributed to you. However, there is
never a double tax. Estates and trusts file their returns on Form 1041, U.S.
Income Tax Return for Estates and Trusts, and your share of the income is
reported to you on Schedule K-1 (Form 1041).
taxmap/pub17/p17-073.htm#en_us_publink1000172082If you are the beneficiary of an estate or trust that must distribute
all of its current income, you must report your share of the distributable net
income, whether or not you actually received it.
taxmap/pub17/p17-073.htm#en_us_publink1000172083
If you are the beneficiary of an estate or trust and the fiduciary has the
choice of whether to distribute all or part of the current income, you must
report:
- All income that is required to be distributed to you, whether
or not it is actually distributed, plus
- All other amounts actually paid or credited to you,
up to the amount of your share of distributable net income.
Treat each item of income the same way that the estate or trust
would treat it. For example, if a trust's dividend income is distributed to you,
you report the distribution as dividend income on your return. The same rule
applies to distributions of tax-exempt interest and capital gains.
The fiduciary of the estate or trust must tell you the type of
items making up your share of the estate or trust income and any credits you are
allowed on your individual income tax return.
taxmap/pub17/p17-073.htm#en_us_publink1000172085Losses of estates and trusts generally are not deductible by
the beneficiaries.
taxmap/pub17/p17-073.htm#en_us_publink1000172086Income earned by a grantor trust is taxable to the grantor, not
the beneficiary, if the grantor keeps certain control over the trust. (The
grantor is the one who transferred property to the trust.) This rule applies if
the property (or income from the property) put into the trust will or may revert
(be returned) to the grantor or the grantor's spouse.
Generally, a trust is a grantor trust if the grantor has a reversionary
interest valued (at the date of transfer) at more than 5% of the value of the
transferred property.
taxmap/pub17/p17-073.htm#en_us_publink1000172087If your personal expenses are paid for by another person, such
as a corporation, the payment may be taxable to you depending upon your
relationship with that person and the nature of the payment. But if the payment
makes up for a loss caused by that person, and only restores you to the position
you were in before the loss, the payment is not includible in your income.
taxmap/pub17/p17-073.htm#en_us_publink1000172088Include all fees for your services in your income. Examples of
these fees are amounts you receive for services you perform as:
- A corporate director,
- An executor, administrator, or personal representative of
an estate,
- A manager of a trade or business you operated before declaring
Chapter 11 bankruptcy,
- A notary public, or
- An election precinct official.
If you are not an employee and the fees for your services from
the same payer total $600 or more for the year, you may receive a Form
1099-MISC. You may need to report your fees as self-employment income. See
Self-Employed Persons, in chapter 1, for a discussion of when you are considered
self-employed.
Corporate director fees are self-employment income. Report these
payments on Schedule C or Schedule C-EZ (Form 1040).
taxmap/pub17/p17-073.htm#en_us_publink1000172092All personal representatives must include in their gross income
fees paid to them from an estate. If you are not in the trade or business of
being an executor (for instance, you are the executor of a friend's or
relative's estate), report these fees on Form 1040, line 21. If you are in the
trade or business of being an executor, report these fees as self-employment
income on Schedule C or Schedule C-EZ (Form 1040). The fee is not includible in
income if it is waived.
taxmap/pub17/p17-073.htm#en_us_publink1000172093Include in your income all payments received from your bankruptcy
estate for managing or operating a trade or business that you operated before
you filed for bankruptcy. Report this income on Form 1040, line 21.
taxmap/pub17/p17-073.htm#en_us_publink1000172094
Report payments for these services on Schedule C or Schedule C-EZ (Form 1040).
These payments are not subject to self-employment tax. (See the separate
instructions for Schedule SE (Form 1040) for details.
taxmap/pub17/p17-073.htm#en_us_publink1000172095
You should receive a Form W-2 showing payments for services performed as an
election official or election worker. Report these payments on line 7 of Form
1040 or Form 1040A or on line 1 of Form 1040EZ.
taxmap/pub17/p17-073.htm#en_us_publink1000172096Payments you receive from a state, political subdivision, or
a qualified foster care placement agency for providing care to qualified foster
individuals in your home generally are not included in your income. However, you
must include in your income payments received for the care of more than 5
individuals age 19 or older and certain difficulty-of-care payments.
A qualified foster individual is a person who:
- Is living in a foster family home, and
- Was placed there by:
- An agency of a state or one of its political subdivisions,
or
- A qualified foster care placement agency.
These are additional payments that are designated by the payer
as compensation for providing the additional care that is required for
physically, mentally, or emotionally handicapped qualified foster individuals. A
state must determine that the additional compensation is needed, and the care
for which the payments are made must be provided in your home.
You must include in your income difficulty-of-care payments received
for more than:
- 10 qualified foster individuals under age 19, or
- 5 qualified foster individuals age 19 or older.
If you are paid to maintain space in your home for emergency
foster care, you must include the payment in your income.
taxmap/pub17/p17-073.htm#en_us_publink1000172099
If you receive payments that you must include in your income, you are in
business as a foster care provider and you are self-employed. Report the
payments on Schedule C or Schedule C-EZ (Form 1040). See Publication 587,
Business Use of Your Home (Including Use by Daycare Providers), to help you
determine the amount you can deduct for the use of your home.
taxmap/pub17/p17-073.htm#en_us_publink1000172100If you find and keep property that does not belong to you that
has been lost or abandoned (treasure-trove), it is taxable to you at its fair
market value in the first year it is your undisputed possession.
taxmap/pub17/p17-073.htm#en_us_publink1000172101If you received a free tour from a travel agency for organizing
a group of tourists, you must include its value in your income. Report the fair
market value of the tour on Form 1040, line 21, if you are not in the trade or
business of organizing tours. You cannot deduct your expenses in serving as the
voluntary leader of the group at the group's request. If you organize tours as a
trade or business, report the tour's value on Schedule C or Schedule C-EZ (Form
1040).
taxmap/pub17/p17-073.htm#en_us_publink1000172102You must include your gambling winnings in income on Form 1040,
line 21. If you itemize your deductions on Schedule A (Form 1040), you can
deduct gambling losses you had during the year, but only up to the amount of
your winnings. See
chapter 28 for information on recordkeeping.
Winnings from lotteries and raffles are gambling winnings. In
addition to cash winnings, you must include in your income the fair market value
of bonds, cars, houses, and other noncash prizes.
 | If you win a state lottery prize payable in installments,
see Publication 525 for more information. |
taxmap/pub17/p17-073.htm#en_us_publink1000172106You may have received a Form W-2G, Certain Gambling Winnings,
showing the amount of your gambling winnings and any tax taken out of them.
Include the amount from box 1 on Form 1040, line 21. Include the amount shown in
box 2 on Form 1040, line 61, as federal income tax withheld.
taxmap/pub17/p17-073.htm#en_us_publink1000172107
Generally, property you receive as a gift, bequest, or inheritance is not
included in your income. However, if property you receive this way later
produces income such as interest, dividends, or rents, that income is taxable to
you. If property is given to a trust and the income from it is paid, credited,
or distributed to you, that income is also taxable to you. If the gift, bequest,
or inheritance is the income from the property, that income is taxable to you.
taxmap/pub17/p17-073.htm#en_us_publink1000172108If you inherited a pension or an individual retirement arrangement
(IRA), you may have to include part of the inherited amount in your income. See
chapter 10 if you inherited a pension. See
chapter 17 if you inherited an IRA.
Losses from a hobby are not deductible from other income. A hobby
is an activity from which you do not expect to make a profit. See
Activity not for profit, earlier.
 |
If you collect stamps, coins, or other items as a hobby for recreation and
pleasure, and you sell any of the items, your gain is taxable as a capital gain.
(See
chapter 16.) However, if you sell items from your collection at a
loss, you cannot deduct the loss.
|
taxmap/pub17/p17-073.htm#en_us_publink1000172116Income from illegal activities, such as money from dealing illegal
drugs, must be included in your income on Form 1040, line 21, or on Schedule C
or Schedule C-EZ (Form 1040) if from your self-employment activity.
taxmap/pub17/p17-073.htm#en_us_publink1000172117If you are a member of a qualified Indian tribe that has fishing
rights secured by treaty, executive order, or an Act of Congress as of March 17,
1988, do not include in your income amounts you receive from activities related
to those fishing rights. The income is not subject to income tax,
self-employment tax, or employment taxes.
taxmap/pub17/p17-073.htm#en_us_publink1000172118taxmap/pub17/p17-073.htm#en_us_publink1000172120You may be able to exclude from income the interest from qualified
U.S. savings bonds you redeem if you pay qualified higher educational expenses
in the same year. For more information on this exclusion, see
Education Savings Bond Program under
U.S. Savings Bonds
in chapter 7.
If a prospective employer asks you to appear for an interview
and either pays you an allowance or reimburses you for your transportation and
other travel expenses, the amount you receive is generally not taxable. You
include in income only the amount you receive that is more than your actual
expenses.
taxmap/pub17/p17-073.htm#en_us_publink1000172123
Jury duty pay you receive must be included in your income on Form 1040, line 21.
If you must give the pay to your employer because your employer continues to pay
your salary while you serve on the jury, you can deduct the amount turned over
to your employer as an adjustment to your income. Enter the amount you repay
your employer on Form 1040, line 36. Enter "Jury Pay" and the amount on the
dotted line next to line 36.
taxmap/pub17/p17-073.htm#en_us_publink1000172124
You must include kickbacks, side commissions, push money, or similar payments
you receive in your income on Form 1040, line 21, or on Schedule C or Schedule
C-EZ (Form 1040), if from your self-employment activity.
taxmap/pub17/p17-073.htm#en_us_publink1000172125You sell cars and help arrange car insurance for buyers. Insurance
brokers pay back part of their commissions to you for referring customers to
them. You must include the kickbacks in your income.
taxmap/pub17/p17-073.htm#en_us_publink1000172126
You generally do not include in income amounts you withdraw from your Archer MSA
or Medicare Advantage MSA if you use the money to pay for qualified medical
expenses. Generally, qualified medical expenses are those you can deduct on
Schedule A (Form 1040), Itemized Deductions. For more information about
qualified medical expenses, see
chapter 21. For more information about Archer MSAs or Medicare Advantage
MSAs, see Publication 969, Health Savings Accounts and Other Tax-Favored Health
Plans.
If you win a prize in a lucky number drawing, television or radio
quiz program, beauty contest, or other event, you must include it in your
income. For example, if you win a $50 prize in a photography contest, you must
report this income on Form 1040, line 21. If you refuse to accept a prize, do
not include its value in your income.
Prizes and awards in goods or services must be included in your
income at their fair market value.
taxmap/pub17/p17-073.htm#en_us_publink1000172129Cash awards or bonuses given to you by your employer for good
work or suggestions generally must be included in your income as wages. However,
certain noncash employee achievement awards can be excluded from income. See
Bonuses and awards in chapter 5.
If you were awarded a prize in recognition of accomplishments
in religious, charitable, scientific, artistic, educational, literary, or civic
fields, you generally must include the value of the prize in your income.
However, you do not include this prize in your income if you meet all of the
following requirements.
- You were selected without any action on your part to enter
the contest or proceeding.
- You are not required to perform substantial future services
as a condition to receiving the prize or award.
- The prize or award is transferred by the payer directly to
a governmental unit or tax-exempt charitable organization as designated by you.
See Publication 525 for more information about the conditions
that apply to the transfer.
A qualified tuition program (also known as a 529 program) is
a program set up to allow you to either prepay or contribute to an account
established for paying a student's qualified higher education expenses at an
eligible educational institution. A program can be established and maintained by
a state, an agency or instrumentality of a state, or an eligible educational
institution.
The part of a distribution representing the amount paid or contributed
to a QTP is not included in income. This is a return of the investment in the
program.
The beneficiary generally does not include in income any earnings
distributed from a QTP if the total distribution is less than or equal to
adjusted qualified higher education expenses. See Publication 970 for more
information.
taxmap/pub17/p17-073.htm#en_us_publink1000172133The following types of payments are treated as pension or annuity
income and are taxable under the rules explained in
chapter 11.
- Tier 1 railroad retirement benefits that are more than the
social security equivalent benefit.
- Tier 2 benefits.
- Vested dual benefits.
If you receive a reward for providing information, include it
in your income.
taxmap/pub17/p17-073.htm#en_us_publink1000172135You may be able to exclude from income all or part of any gain
from the sale or exchange of your main home. See
chapter 15.
If you sold an item you owned for personal use, such as a car, refrigerator,
furniture, stereo, jewelry, or silverware, your gain is taxable as a capital
gain. Report it on Schedule D (Form 1040). You cannot deduct a loss.
However, if you sold an item you held for investment, such as gold or silver
bullion, coins, or gems, any gain is taxable as a capital gain and any loss is
deductible as a capital loss.
taxmap/pub17/p17-073.htm#en_us_publink1000172138You sold a painting on an online auction website for $100. You
bought the painting for $20 at a garage sale years ago. Report your gain as a
capital gain on Schedule D (Form 1040).
taxmap/pub17/p17-073.htm#en_us_publink1000172139A candidate for a degree can exclude amounts received as a qualified
scholarship or fellowship. A qualified scholarship or fellowship is any amount
you receive that is for:
- Tuition and fees to enroll at or attend an educational institution,
or
- Fees, books, supplies, and equipment required for courses
at the educational institution.
Amounts used for room and board do not qualify for the exclusion.
See Publication 970 for more information on qualified scholarships and
fellowship grants.
Generally, you must include in income the part of any scholarship or fellowship
that represents payment for past, present, or future teaching, research, or
other services. This applies even if all candidates for a degree must perform
the services to receive the degree.
For information about the rules that apply to a tax-free qualified
tuition reduction provided to employees and their families by an educational
institution, see Publication 970.
taxmap/pub17/p17-073.htm#en_us_publink1000172141Allowances paid by the Department of Veterans Affairs are not
included in your income. These allowances are not considered scholarship or
fellowship grants.
taxmap/pub17/p17-073.htm#en_us_publink1000172142Scholarship prizes won in a contest are not scholarships or fellowships
if you do not have to use the prizes for educational purposes. You must include
these amounts in your income on Form 1040, line 21, whether or not you use the
amounts for educational purposes.
taxmap/pub17/p17-073.htm#en_us_publink1000172143If you steal property, you must report its fair market value
in your income in the year you steal it unless in the same year, you return it
to its rightful owner.
taxmap/pub17/p17-073.htm#en_us_publink1000172144Do not include in your income a school board mileage allowance
for taking children to and from school if you are not in the business of taking
children to school. You cannot deduct expenses for providing this
transportation.
taxmap/pub17/p17-073.htm#en_us_publink1000172145Amounts deducted from your pay for union dues, assessments, contributions,
or other payments to a union cannot be excluded from your income.
You may be able to deduct some of these payments as a miscellaneous
deduction subject to the 2%-of-AGI limit if they are related to your job and if
you itemize deductions on Schedule A (Form 1040). For more information, see
Union Dues and Expenses in chapter 28.
Benefits paid to you by a union as strike or lockout benefits,
including both cash and the fair market value of other property, are usually
included in your income as compensation. You can exclude these benefits from
your income only when the facts clearly show that the union intended them as
gifts to you.
taxmap/pub17/p17-073.htm#en_us_publink1000172148
If you are a customer of an electric utility company and you participate in the
utility's energy conservation program, you may receive on your monthly electric
bill either:
- A reduction in the purchase price of electricity furnished
to you (rate reduction), or
- A nonrefundable credit against the purchase price of the electricity.
The amount of the rate reduction or nonrefundable credit is
not included in your income.
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